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.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Similar content being viewed by others
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.
References
Artle, R., & Averous, C. (1973). The telephone systems as a public good: static and dynamic aspects. Bell Journal of Economics, 4, 89–100.
Bonanno, G. (1987). Location choice, product proliferation and entry deterrence. Review of Economic Studies, 54, 37–46.
Chiang, A. (1992). Elements of dynamic optimization. New York: McGraw-Hill.
Dhebar, A., & Oren, S. (1985). Optimal dynamic pricing for expanding networks. Marketing Science, 4, 336–351.
Eisner, R., & Strotz, R.H. (1963). Deteminants of business investment. In Impacts of monetary policy, research studies prepared for the commission on money and credit. Englewood Cliffs: Prentice-Hall.
Evans, G. C. (1924). The dynamics of monopoly. American Mathematical Monthly, 31, 75–83.
Gould, J. P. (1968). Adjustment costs in the theory of investment of the firm. Review of Economic Studies, 35, 47–55.
Hotelling, H. (1929). Stability in Competition. Economic Journal, 39, 41–57.
Lambertini, L. (2005). Advertising in a dynamic spatial monopoly. European Journal of Operational Research, 166, 547–556.
Lambertini, L. (2007). Dynamic spatial monopoly with product development. Spatial Economic Analysis, 2, 157–166.
Lambertini, L. (2009). Capital accumulation for production in a dynamic spatial monopoly. Journal of Mathematical Sciences, 161, 226–234.
Lambertini, L. (2018). Differential games in industrial economics. Cambridge: Cambridge University Press.
Lambertini, L., & Orsini, R. (2004). Network externality and the coordination problem. Journal of Economics, 82, 123–36.
Mussa, M., & Rosen, S. (1978). Monopoly and product quality. Journal of Economic Theory, 18, 301–317.
Nerlove, M., & Arrow, K. J. (1962). Optimal advertising policy under dynamic conditions. Economica, 29, 129–142.
Rohlfs, J. (1974). A theory of interdependent demand for a communications service. Bell Journal of Economics, 5, 16–37.
Tintner, G. (1937). Monopoly over time. Econometrica, 5, 160–170.
Vidale, M., & Wolfe, H. (1957). An operations research study of sales response to advertising. Operations Research, 5, 370–381.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2020 The Author(s)
About this chapter
Cite this chapter
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
Download citation
DOI: https://doi.org/10.1007/978-3-030-40098-9_10
Published:
Publisher Name: Palgrave Macmillan, Cham
Print ISBN: 978-3-030-40097-2
Online ISBN: 978-3-030-40098-9
eBook Packages: Economics and FinanceEconomics and Finance (R0)