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Feedback Competitive Advertising Strategies with a General Objective Function

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Abstract

We introduce a general objective function, which incorporates competitive situations, such as conservative, punitive, and predatory advertising. Linking together the particular situations into a two-parameter family of max–min problems, and using the Lanchester model to describe the dynamics of the market, a bilinear-quadratic differential game is obtained. For this game, we find saddle-point feedback time-invariant advertising strategies and show when these strategies are Nash equilibrium strategies. In an empirical application involving duopolistic competition in the cola market, we find evidence of a punitive motivation for the advertising strategies.

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Authors and Affiliations

  1. School of Business Administration, Bar-Ilan University, Ramal-Gar, 52900, Israel

    G. Fruchter (Senior Lecturer)

  2. Hong Kong University of Science and Technology, Hong Kong

    G. Fruchter (Senior Lecturer)

  3. Marketing and International Business, School of Business, University of Washington, Seattle, Washington

    G. M. Erickson (Professor)

  4. Leon Recanati Graduate School of Business Management, Tel Aviv University, Tel Aviv, Israel

    S. Kalish (Senior Lecturer)

Authors
  1. G. Fruchter
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  2. G. M. Erickson
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  3. S. Kalish
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Fruchter, G., Erickson, G.M. & Kalish, S. Feedback Competitive Advertising Strategies with a General Objective Function. Journal of Optimization Theory and Applications 109, 601–613 (2001). https://doi.org/10.1023/A:1017567805831

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  • DOI: https://doi.org/10.1023/A:1017567805831

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