Optimal pricing and advertising in a durable-good duopoly

Citation data:

European Journal of Operational Research, ISSN: 0377-2217, Vol: 200, Issue: 2, Page: 486-497

Publication Year:
2010
Usage 2713
Abstract Views 2705
Link-outs 6
Full Text Views 2
Captures 65
Readers 35
Exports-Saves 30
Mentions 1
Blog Mentions 1
Citations 39
Citation Indexes 39
Repository URL:
http://stars.library.ucf.edu/facultybib2010/387
DOI:
10.1016/j.ejor.2009.01.003
Author(s):
Anand Krishnamoorthy; Ashutosh Prasad; Suresh P. Sethi
Publisher(s):
Elsevier BV
Tags:
Mathematics; Decision Sciences; Control; Dynamic programming; Game theory; Marketing; Differential games; DYNAMIC DUOPOLY; DIFFERENTIAL GAME; CONSUMER DURABLES; MODEL; STRATEGIES; COMPETITION; DIFFUSION; QUALITY; Management; Operations Research & Management Science
Most Recent Blog Mention
article description
This paper analyzes dynamic advertising and pricing policies in a durable-good duopoly. The proposed infinite-horizon model, while general enough to capture dynamic price and advertising interactions in a competitive setting, also permits closed-form solutions. We use differential game theory to analyze two different demand specifications – linear demand and isoelastic demand – for symmetric and asymmetric competitors. We find that the optimal price is constant and does not vary with cumulative sales, while the optimal advertising is decreasing with cumulative sales. Comparative statics for the results are presented.