A model of optimal advertising expenditures in a dynamic duopoly

Maria Paz Espinosa and Petr Mariel

Atlantic Economic Journal, 2001, vol. 29, issue 2, 135-161

Abstract: This paper develops a dynamic model of oligopolistic advertising competition. The model is general enough to include predatory advertising and informative advertising as particular cases. The analysis is conducted in a differential game framework and compares the open-loop and feedback equilibria to the efficient outcome. It is found that for the informative advertising competition game, advertising levels are closer to the collusive outcomes in a feedback equilibrium. In the case of predatory advertising, expenditures are inefficiently high in a feedback equilibrium and the open-loop solution is more efficient. Copyright International Atlantic Economic Society 2001

Date: 2001
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DOI: 10.1007/BF02299134

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