Title

Optimal Pricing And Advertising In A Durable-Good Duopoly

Keywords

Control; Differential games; Dynamic programming; Game theory; Marketing

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. © 2009 Elsevier B.V. All rights reserved.

Publication Date

1-16-2010

Publication Title

European Journal of Operational Research

Volume

200

Issue

2

Number of Pages

486-497

Document Type

Article

Personal Identifier

scopus

DOI Link

https://doi.org/10.1016/j.ejor.2009.01.003

Socpus ID

69249205616 (Scopus)

Source API URL

https://api.elsevier.com/content/abstract/scopus_id/69249205616

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