Differential game approach to pricing and advertising decisions |
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Affiliation: | 1. Leicester Castle Business School, Faculty of Business & Law, De Montfort University, Leicester, UK;2. Faculty of Management, University of Tehran, Tehran, Iran |
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Abstract: | This study proposes a model to make concurrent decisions on dynamic pricing and advertising to maximise firms' profitability over an infinite time horizon in a duopoly market. To this end, the Nerlove-Arrow pricing and advertising model is designed in the presence of shifting costs in a dynamic duopolistic competition as a differential game. The Nash equilibrium solution is defined based upon a set of Hamilton–Jacobi–Bellman. Four scenarios are applied for economic interpretations and the efficacy of the model. |
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Keywords: | Dynamic pricing Dynamic advertising Duopoly market Shift costs Differential game |
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