Advertising Strategies in Electronic Retailing: A Differential Games Approach

Abstract

W e consider advertising problems under an information technology (IT) capacity constraint encountered by electronic retailers in a duopolistic setting. There is a considerable amount of literature on advertising games between firms, yet introducing an IT capacity constraint fundamentally changes this problem. In the presence of information processing constraints, although advertising may still cause a customer to switch, it may not result in a sale, i.e., the customer may be lost by both firms. This situation could occur when customers have a limited tolerance for processing delays and leave the website of a firm because of slow response. In such situations, attracting more traffic to a firm's site (by increasing advertising expenditure) may not generate enough additional revenue to warrant this expenditure. We use a differential game formulation to obtain closedform solutions for the advertising effort over time in the presence of IT capacity constraints. Based on these solutions, we present several useful managerial insights.

Economic Analysis of Reward Advertising

“…Our study is also related to the literature on advertising (Anderson and Coate , Anderson and Gabszewicz , Bagwell , Liu et al. ). For online advertising, Asdemir et al.…”

Understanding Consumer Digital Consumption Behaviour in the Edge of Social Media Platforms

“…According to previous studies, advertising credibility has a positive effect on web advertising value (Dao et al, 2014;Liu et al, 2012) and in the Facebook context, a positive recommended advertising credibility leads to positive perceptions of Facebook recommended advertising. Thus, the following hypothesis is proposed: H3.…”

Differential Game Model for Disaster Relief Cooperation between Host Government and Private Sector

“…To display the details of decision results in this study directly, a numerical analysis method is used to analyse the key indicators in different situations. According to the selection of numerical analysis data in literature (Liu et al, 2012) and combined with the actual situation, the following parameters are assigned for analysis: , , ,…”

“…Therefore, this paper attempts to enrich the content of quantitative research in this field through mathematical modelling and describe the decision-making process between the government and the private sector in the process of disaster relief. In disaster relief, the government and the private sector are independent of bound rationality, in which a decision can be difficult to achieve in a stable equilibrium, and the differential game is dealing with all parties or more consecutive time conflicts, competition or a cooperation important dynamic game model, which is widely used in dynamic competitive advertising (Liu et al, 2012;Guan et al, 2020), and corporate reputation management fields. Thus, the choice differential game has certain practicality and rationality.…”