A dynamic model for advertising and pricing competition between national and store brands
Salma Karray and
European Journal of Operational Research, 2009, vol. 193, issue 2, 451-467
We study the relationship between the pricing and advertising decisions in a channel where a national brand is competing with a private label. We consider a differential game that incorporates the carryover effects of brand advertising over time for both the manufacturer and the retailer and we account for the complementary and competitive roles of advertising. Analysis of the obtained equilibrium Markov strategies shows that the relationship between advertising and pricing decisions in the channel depends mainly on the nature of the advertising effects. In particular, the manufacturer reacts to higher competitive retailer's advertising levels by offering price concessions and limiting his advertising expenditures. The retailer's optimal reaction to competitive advertising effects in the channel depends on two factors: (1) the price competition level between the store and the national brands and (2) the strength of the competitive advertising effects. For example, in case of intense price competition between the two brands combined with a strong manufacturer's competitive advertising effect, the retailer should lower both the store and the national brands' prices as a reaction to higher manufacturer's advertising levels. For the retailer, the main advantage from boosting his competitive advertising investments seems to be driven by increased revenues from the private label. The retailer should however limit his investments in advertising if the latter generates considerable competitive effects on the national brand's sales.
Keywords: Game; theory; Marketing; Distribution; Pricing; Advertising (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:193:y:2009:i:2:p:451-467
Access Statistics for this article
European Journal of Operational Research is currently edited by Roman Slowinski, Jesus Artalejo, Jean-Charles. Billaut, Robert Dyson and Lorenzo Peccati
More articles in European Journal of Operational Research from Elsevier
Bibliographic data for series maintained by Haili He ().