Advertising Events in a Competitive Framework

We study the problem of how to minimize the advertising costs for a one-time entertainment event taking competition into account. Using the concept of Nerlove-Arrow goodwill, we describe a market where two single players organize two different events. A single-player instance of the same problem has been analyzed already in the literature using both the Nerlove-Arrow dynamics and the Bass dynamics, but without considering a competitive framework. In this work, starting from a linear-quadratic model, we consider competition in the market and we study the problem in the settings of linear-quadratic deterministic and stochastic differential games. The analytical tractability of the problem allows us to characterize the Nash equilibria and to study the new features of the competitive scenario. In the deterministic instance of the model, we show that competition decreases efficiency. On the other hand, when the goodwill evolution is stochastic, competition may even increase efficiency by a diversification effect.