Feedback Competitive Advertising Strategies with a General Objective Function |
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Authors: | G Fruchter G M Erickson S Kalish |
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Institution: | (1) School of Business Administration, Bar-Ilan University, Ramal-Gar, 52900, Israel;(2) Hong Kong University of Science and Technology, Hong Kong;(3) Marketing and International Business, School of Business, University of Washington, Seattle, Washington;(4) Leon Recanati Graduate School of Business Management, Tel Aviv University, Tel Aviv, Israel |
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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. |
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Keywords: | differential games subgame perfect equilibrium saddle-point feedback strategies Nash equilibrium strategies Isaacs equation competitive advertising marketing general objective function |
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