Title

Optimal pricing and advertising in a durable-good duopoly

Authors

Authors

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

Comments

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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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