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Feedback Competitive Advertising Strategies with a General Objective Function

Author

Listed:
  • G. Fruchter

    (Bar-Ilan University
    Hong Kong University of Science and Technology)

  • G. M. Erickson

    (University of Washington)

  • S. Kalish

    (Tel Aviv University)

Abstract

We introduce a general objective function, which incorporates competitive situations, such as conservative, punitive, and predatory advertising. Linking together the particular situations into a two-parameter family of max–min problems, and using the Lanchester model to describe the dynamics of the market, a bilinear-quadratic differential game is obtained. For this game, we find saddle-point feedback time-invariant advertising strategies and show when these strategies are Nash equilibrium strategies. In an empirical application involving duopolistic competition in the cola market, we find evidence of a punitive motivation for the advertising strategies.

Suggested Citation

  • G. Fruchter & G. M. Erickson & S. Kalish, 2001. "Feedback Competitive Advertising Strategies with a General Objective Function," Journal of Optimization Theory and Applications, Springer, vol. 109(3), pages 601-613, June.
    • Handle: RePEc:spr:joptap:v:109:y:2001:i:3:d:10.1023_a:1017567805831
    DOI: 10.1023/A:1017567805831
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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