Advertising in a Differential Oligopoly Game

Roberto Cellini and Luca Lambertini ()

Journal of Optimization Theory and Applications, 2003, vol. 116, issue 1, No 4, 81 pages

Abstract: Abstract We illustrate a differential oligopoly game where firms compete à la Cournot in homogeneous goods in the market phase and invest in advertising activities aimed at increasing the consumers reservation price. Such investments produce external effects, characterizing the advertising activity as a public good. We derive the open-loop and closed-loop Nash equilibria, and show that the properties of the equilibria depend on the curvature of the market demand function. The comparative assessment of these equilibria shows that the firms advertising efforts are larger in the open-loop equilibrium than in the closed-loop equilibrium. We also show that a cartel involving all the firms, setting both output levels and advertising efforts, may produce a steady state where the social welfare level is higher than the social welfare levels associated with both open-loop and closed-loop noncooperative settings.

Keywords: Advertising; differential games; capital accumulation; open-loop equilibrium; closed-loop equilibrium (search for similar items in EconPapers)
Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

Downloads: (external link)
http://link.springer.com/10.1023/A:1022158102252 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
Working Paper: Advertising in a Differential Oligopoly Game (2001)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:joptap:v:116:y:2003:i:1:d:10.1023_a:1022158102252

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10957/PS2

DOI: 10.1023/A:1022158102252

Access Statistics for this article

Journal of Optimization Theory and Applications is currently edited by Franco Giannessi and David G. Hull

More articles in Journal of Optimization Theory and Applications from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().