Article ID: | iaor2001100 |
Country: | United Kingdom |
Volume: | 20 |
Issue: | 4 |
Start Page Number: | 199 |
End Page Number: | 211 |
Publication Date: | Jul 1999 |
Journal: | Optimal Control Applications & Methods |
Authors: | Fruchter Gila E. |
Keywords: | game theory, advertising |
This study extends the literature of dynamic advertising competition by allowing oligopoly competition and market expansion that results from advertising. We find how advertising actions affect market development and how, conversely, market development influences advertising policies over time. Modelling the competition by a differential game, we solve for both time-variant closed-loop and time-invariant feedback Nash equilibrium strategies. The time-variant closed-loop strategy depends on a firm's own sales rates and the time-invariant feedback strategy depends on the growth of the market. We discuss the marketing implications of the results.