Feedback Competitive Advertising Strategies with a General Objective Function

G. Fruchter, G. M. Erickson and S. Kalish
Additional contact information
G. Fruchter: Bar-Ilan University
G. M. Erickson: University of Washington
S. Kalish: Tel Aviv University

Journal of Optimization Theory and Applications, 2001, vol. 109, issue 3, No 7, 613 pages

Abstract: 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.

Keywords: differential games; subgame perfect equilibrium; saddle-point feedback strategies; Nash equilibrium strategies; Isaacs equation; competitive advertising; marketing; general objective function (search for similar items in EconPapers)
Date: 2001
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DOI: 10.1023/A:1017567805831

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