A goodwill model with predatory advertising |
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Authors: | Luca Grosset Paolo Roberti Bruno Viscolani |
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Institution: | aDip. di Matematica Pura e Applicata, University of Padua, Via Trieste 63, I-35121 Padua, Italy;bDip. di Scienze Economiche “M. Fanno”, University of Padua, Via del Santo 22, I-35123 Padua, Italy |
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Abstract: | We investigate the dynamic advertising policies of two competing firms in a duopolistic industry, assuming a predatory phenomenon between their advertising campaigns. The resulting model is a differential game which is not linear-quadratic. We show that there exists a Markovian Nash equilibrium, and that it leads to time constant advertising strategies. According to this model, predatory advertising produces a negative externality: the interference between the advertising campaigns decreases the total demand of the market. |
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Keywords: | Advertising Goodwill Differential games |
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