ADVERTISING IN A COMPETITIVE PRODUCT LINE

Gila E. Fruchter ()
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Gila E. Fruchter: Graduate School of Business Administration, Bar-Ilan University, Ramat-Gan 52900, Israel

International Game Theory Review (IGTR), 2001, vol. 03, issue 04, 301-314

Abstract: In many markets, competing but differentiated firms offer a product line in order to target each product to a different type of customer. Under competition, firms, while trying to target different products to different segments, are also interested in "stealing" customers from the competitors and, in particular, customers from the most profitable segments. How should a profit-maximising firm allocate the advertising budget along a competitive product line? Devel oping a closed-loop time-variant Nash equilibrium strategy for a multi-player multi-product advertising game, we find the determinants of the optimal advertising budget allocation in a product line in an oligopoly growing market. Moreover, for a symmetric competition in a fixed market, we derive an analytic feedback time-variant Nash equilibrium strategy. Marketing implications regarding the firm's strategic orientation in product preference advertising spending, as well as comparison to rivals' spending, are discussed. Finally, we show that using a single-product advertising game instead of a multi-product advertising game, leads to over-advertising.

JEL-codes: B4 C0 C6 C7 D5 D7 M2 (search for similar items in EconPapers)
Date: 2001
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Citations: View citations in EconPapers (3)

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DOI: 10.1142/S0219198901000439

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