Abstract
A dynamic Hotelling monopoly model is proposed, with the purpose of characterising the effects of informative and persuasive advertising in a regime of partial market coverage. The two models are solved to show the emergence of a unique saddle-point steady-state equilibrium in both cases. Then, equilibrium profits are compared to illustrate that the firm’s preferences on the type of advertising effort to be adopted strictly depend on initial conditions.
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Notes
- 1.
- 2.
The remaining solution of the second FOC, \(x=1/2-\sqrt {s/3}\), can be disregarded in view of the definition of q M.
- 3.
Henceforth, the time argument will be omitted throughout the analysis of this case, for the sake of brevity.
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Lambertini, L. (2020). Informative Versus Persuasive Advertising in a Dynamic Hotelling Monopoly. In: Colombo, S. (eds) Spatial Economics Volume I. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-40098-9_10
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DOI: https://doi.org/10.1007/978-3-030-40098-9_10
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