Offensive, Defensive, and Generic Advertising Strategies in a Dynamic Oligopolistic Market

Abstract

In today’s highly competitive business environment, advertisement plays an influential role in attracting customers and increasing market share. Companies adopt different advertising strategies in a competitive market, such as offensive, defensive, and generic, to keep and increase their market share. Researchers have generally modeled this problem using a dynamic differential game. All previous research studies have focused on finding these strategies in a duopoly market. Also, to simultaneously determine the optimal equilibrium strategy for these three strategies, the model is designed as a symmetric game due to the ease of solving. In contrast with the previous researches, the purpose of this paper is to present and solve an asymmetric game model to determine the optimal offensive, defensive, and generic advertising strategies in an oligopoly market. The proposed model’s objective is to obtain the maximum equilibrium profit for each company at any moment regarding the market share of each company and those of competitors. A numerical solution method based on the Pontryagin’s maximum principle is developed to solve the model. Then, the proposed model is solved for a triopoly market. Also, the sensitivity of the results to changes in model parameters has been investigated. The obtained results denote that in markets with more than two players under the asymmetric game, the proposed model can prescribe the optimal type of offensive, defensive, and generic advertising strategies.