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The unique equilibrium in a model of sales with costly advertising

Michael Arnold () and Lan Zhang

Economics Letters, 2014, vol. 124, issue 3, 457-460

Abstract: We demonstrate that the Varian (1980) model of sales has a unique Nash equilibrium when firms incur costly advertising to compete for informed consumers. The equilibrium is symmetric. In particular, with costly advertising, the asymmetric equilibria highlighted by Baye et al. (1992) do not arise.

Keywords: Advertising; Sales; Unique equilibrium; Price dispersion (search for similar items in EconPapers)
JEL-codes: D4 D83 L19 L89 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:124:y:2014:i:3:p:457-460

DOI: 10.1016/j.econlet.2014.07.005

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