Dynamic Duopolistic Competition with Sticky Prices and Advertising in Product Differentiation Market: A Feedback Nash Equilibrium

Wu, Xiaojie; Zhang, Bixi; Li, Shuangmei; Xiu-qiong, Wang

doi:10.1109/iciecs.2009.5366122

Cited by 1 publication

(3 citation statements)

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“…The objective of the player i is to maximize the profit by selecting the path of control u i (t). In this present study, we consider the two scenarios in the problem analyzed by Fershtman and Kamien (1987), Cellini and Lambertini (2002, 2003b and Wu et al (2009). This study shows a generalization of previous models and investigates two scenarios in the oligopoly strategy with N firms have two state variables (prices and advertising) under the open-loop and closed-loop solutions.…”

Section: Basic Modelmentioning

confidence: 98%

“…Indeed, previous studies that focus on an integration of these parameters is scarce. Wu et al (2009) develop a differential duopolistic game model and investigate the interactions of Nash equilibrium on dynamic price and advertising in a competitive setting. They analyze the advertising and price stickiness and discuss the impact of related factors on the levels of advertising and quantity.…”

Section: Literate Reviewmentioning

confidence: 99%

“…We formalize this idea, borrowing Spence (1976) idea and used by Singh and Vives (1984), Lambertini (1998, 2002) and Wu et al (2009). Then, we develop the idea by adding promotional efforts of N firms.…”

Section: K 483mentioning

confidence: 99%

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A dynamic differential oligopoly game with sticky price and advertising

Raoufinia

Baradaran

Shahrjerdi

2019

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Purpose The purpose of this study is to analyze comparatively the properties of open-loop and closed-loop equilibria in a dynamic oligopoly model with price dynamics and reflexive behavior of market agents. Design/methodology/approach To consider dynamic competitive markets, the authors focus on a differential game theory in oligopolistic structures, using analytical models to illustrate how advertising effort, good differentiation and price stickiness interact simultaneously in the open-loop and the closed-loop Nash equilibria. The comparative assessment of these equilibria obtains some significant results. Findings An optimization model that enriches the continuous time is presented. Under the open-loop and the closed-loop, Nash equilibrium showed an increase in the total output, advertising in price stickiness and promotional efficiency, while there was a decrease in product differentiation and advertising promotional efficiency. However, the open-loop equilibrium levels are larger than the closed-loop equilibrium. Under the closed-loop information, the long-run equilibrium was faster than the opened-loop in a dynamic oligopoly. The graphical illustration was used to present the behavior of the model parameters. Practical implications This study helps managers to choose an appropriate price and advertising adjustment to maximize profit. The obtained results may help firms to make the smart decision and may provide managers the valuable tool for making decisions in the competitive market environments. Originality/value This is a first attempt to analyze a dynamic oligopoly in the differentiated market environment. It considers a joint action of the output and advertising in shaping the closed-loop and the open-loop equilibria with N competitors in a dynamic competitive setting.

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