A Dynamic Model of Advertising and Market Shares

Chin Lim and Nai Pew Ong

Canadian Journal of Economics, 1989, vol. 22, issue 4, 819-33

Abstract: This paper presents a model of strategic advertising and the battle for market shares between incumbents and entrants. The lagged impact of advertising allows incumbents strategically to use preentry advertising to effect the postentry equilibrium solution. However, because the advantages to advertising are erodable by counter-persuasive advertising strategies of entrants, the threat of entry may cause incumbents to take retreative or aggressive strategies. The incumbants' retreative or aggressive posture depends crucially on the erosion impact on their advertising.

Date: 1989
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