Optimal pricing and advertising in a durable-good duopoly

    Authors

    A. Krishnamoorthy; A. Prasad;S. P. Sethi

    Comments

    Authors: contact us about adding a copy of your work at STARS@ucf.edu

    Abbreviated Journal Title

    Eur. J. Oper. Res.

    Keywords

    Control; Dynamic programming; Game theory; Marketing; Differential games; DYNAMIC DUOPOLY; DIFFERENTIAL GAME; CONSUMER DURABLES; MODEL; STRATEGIES; COMPETITION; DIFFUSION; QUALITY; Management; Operations Research & Management Science

    Abstract

    This paper analyzes dynamic advertising and pricing policies in a durable-good duopoly. The proposed infinite-horizon model, while general enough to capture dynamic price and advertising interactions in a competitive setting, also permits closed-form solutions. We use differential game theory to analyze two different demand specifications - linear demand and isoelastic demand - for symmetric and asymmetric competitors. We find that the optimal price is constant and does not vary with cumulative sales, while the optimal advertising is decreasing with cumulative sales. Comparative statics for the results are presented. (C) 2009 Elsevier B.V. All rights reserved.

    Journal Title

    European Journal of Operational Research

    Volume

    200

    Issue/Number

    2

    Publication Date

    1-1-2010

    Document Type

    Article

    Language

    English

    First Page

    486

    Last Page

    497

    WOS Identifier

    WOS:000270647100015

    ISSN

    0377-2217

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