IDEAS home Printed from https://ideas.repec.org/a/wsi/igtrxx/v17y2015i02ns0219198915400149.html
   My bibliography  Save this article

Long-run Strategic Advertising and Short-run Bertrand Competition

Author

Listed:
  • Reinoud Joosten

    (IEBIS, University of Twente, POB 217, 7500 AE Enschede, The Netherlands)

Abstract

We model and analyze strategic interaction over time in a duopoly. Each period the firms independently and simultaneously take two sequential decisions. First, they decide whether or not to advertise, then they set prices for goods which are imperfect substitutes. Not only the own, but also the other firm's past advertisement efforts affect the current "sales potential" of each firm. How much of this potential materializes as immediate sales, depends on current advertisement decisions. If both firms advertise, "sales potential" turns into demand, otherwise part of it "evaporates" and does not materialize. We determine feasible rewards and equilibria for the limiting average reward criterion. Uniqueness of equilibrium is by no means guaranteed, but Pareto efficiency may serve very well as a refinement criterion for wide ranges of the advertisement costs.

Suggested Citation

  • Reinoud Joosten, 2015. "Long-run Strategic Advertising and Short-run Bertrand Competition," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 17(02), pages 1-24.
    • Handle: RePEc:wsi:igtrxx:v:17:y:2015:i:02:n:s0219198915400149
    DOI: 10.1142/S0219198915400149
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S0219198915400149
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S0219198915400149?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. James A. Brander & Richard Harris, 1983. "Anticipated Collusion and Excess Capacity," Working Paper 530, Economics Department, Queen's University.
    2. Reinoud Joosten, 2004. "Strategic Interaction and Externalities: FD-games and pollution," Papers on Economics and Evolution 2004-17, Philipps University Marburg, Department of Geography.
    3. Martin J. Osborne & Ariel Rubinstein, 1994. "A Course in Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650401, April.
    4. Dockner,Engelbert J. & Jorgensen,Steffen & Long,Ngo Van & Sorger,Gerhard, 2000. "Differential Games in Economics and Management Science," Cambridge Books, Cambridge University Press, number 9780521637329.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Reinoud Joosten, 2007. "Strategic Advertisement with Externalities: A New Dynamic Approach," Papers on Economics and Evolution 2007-02, Philipps University Marburg, Department of Geography.
    2. Streufert, Peter, 2018. "The Category of Node-and-Choice Forms, with Subcategories for Choice-Sequence Forms and Choice-Set Forms," MPRA Paper 90490, University Library of Munich, Germany.
    3. Engwerda, J.C., 2012. "Prospects of Tools from Differential Games in the Study Of Macroeconomics of Climate Change," Discussion Paper 2012-045, Tilburg University, Center for Economic Research.
    4. Peter A. Streufert, 2020. "The Category of Node-and-Choice Extensive-Form Games," University of Western Ontario, Departmental Research Report Series 20204, University of Western Ontario, Department of Economics.
    5. Engwerda, J.C., 2012. "Prospects of Tools from Differential Games in the Study Of Macroeconomics of Climate Change," Other publications TiSEM cac36d07-227b-4cf2-83cb-7, Tilburg University, School of Economics and Management.
    6. Masahiko Hattori & Yasuhito Tanaka, 2019. "General analysis of dynamic oligopoly with sticky price," Economics Bulletin, AccessEcon, vol. 39(4), pages 2990-2998.
    7. Battigalli, Pierpaolo & Bonanno, Giacomo, 1997. "The Logic of Belief Persistence," Economics and Philosophy, Cambridge University Press, vol. 13(1), pages 39-59, April.
    8. Szabó, György & Borsos, István & Szombati, Edit, 2019. "Games, graphs and Kirchhoff laws," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 521(C), pages 416-423.
    9. Shi, Yi & Deng, Yawen & Wang, Guoan & Xu, Jiuping, 2020. "Stackelberg equilibrium-based eco-economic approach for sustainable development of kitchen waste disposal with subsidy policy: A case study from China," Energy, Elsevier, vol. 196(C).
    10. Luca Lambertini & Arsen Palestini & Alessandro Tampieri, 2016. "CSR in an Asymmetric Duopoly with Environmental Externality," Southern Economic Journal, John Wiley & Sons, vol. 83(1), pages 236-252, July.
    11. Açıkgöz, Ömer T. & Benchekroun, Hassan, 2017. "Anticipated international environmental agreements," European Economic Review, Elsevier, vol. 92(C), pages 306-336.
    12. Xiaochi Wu, 2022. "Existence of value for a differential game with asymmetric information and signal revealing," International Journal of Game Theory, Springer;Game Theory Society, vol. 51(1), pages 213-247, March.
    13. Marc Le Menestrel, 2003. "A one-shot Prisoners’ Dilemma with procedural utility," Economics Working Papers 819, Department of Economics and Business, Universitat Pompeu Fabra.
    14. Cheng‐Kuang Wu & Yi‐Ming Chen & Dachrahn Wu & Ching‐Lin Chi, 2020. "A Game Theory Approach for Assessment of Risk and Deployment of Police Patrols in Response to Criminal Activity in San Francisco," Risk Analysis, John Wiley & Sons, vol. 40(3), pages 534-549, March.
    15. Régis Chenavaz & Corina Paraschiv & Gabriel Turinici, 2017. "Dynamic Pricing of New Products in Competitive Markets: A Mean-Field Game Approach," Working Papers hal-01592958, HAL.
    16. Nasimeh Heydaribeni & Achilleas Anastasopoulos, 2019. "Linear Equilibria for Dynamic LQG Games with Asymmetric Information and Dependent Types," Papers 1909.04834, arXiv.org.
    17. Reinhard Neck & Dmitri Blueschke, 2014. "“Haircuts” for the EMU periphery: virtue or vice?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 41(2), pages 153-175, May.
    18. Müller, Christoph, 2020. "Robust implementation in weakly perfect Bayesian strategies," Journal of Economic Theory, Elsevier, vol. 189(C).
    19. Hitoshi Matsushima, 2019. "Implementation without expected utility: ex-post verifiability," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 53(4), pages 575-585, December.
    20. Guillaume Bataille & Benteng Zou, 2024. "International Fisheries Agreements: Endogenous Exits, Shapley Values, and Moratorium Fishing Policy," DEM Discussion Paper Series 24-06, Department of Economics at the University of Luxembourg.

    More about this item

    Keywords

    Advertising; externalities; average rewards; equilibria; 91A10; 91A15; 91A25; 90B60;
    All these keywords.

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • C0 - Mathematical and Quantitative Methods - - General
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:igtrxx:v:17:y:2015:i:02:n:s0219198915400149. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/igtr/igtr.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.