On Advertising Games and Spillover in Service Systems

Motivated by the industry cases, we model the advertising competition between the dominant service provider and small service providers in one service market, where the dominant service provider has a major market share and the other small service providers share the remainder of market equally. Based on this setting, we discuss three advertising game models, that is, cooperative game, Boxed Pig game, and Prisoner’s game, derive the conditions for different advertising games, and characterize their equilibria. To be specific, it is found that the advertising spillover and the number of the small service providers directly determines the advertising game equilibria, while other market parameters, to some extent, can affect the results of the advertising game equilibria. According to our theoretical findings, some management insights and suggestions are given from both the academic and practical perspectives.