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Advertising and endogenous exit in a differentiated duopoly
journal contribution
posted on 2023-06-08, 23:40 authored by Andrea Mantovani, Giordano MionIn this paper we consider a two-stage duopoly game where firms first decide whether to invest in advertising and then compete in prices. Advertising has two effects : a market enlargement for both firms and a predatory gain for the investing firm only. Both symmetric and asymmetric equilibria may arise. The two most interesting cases are a coordination game where both firms investing and non-investing are equilibria, and a chicken game where only one firm invests while the other is possibly driven (endogenously) out of the market. Our results suggest that product differentiation has an ambiguous impact on investment in advertising and that strong product substitutability may induce a coordination problem.
History
Publication status
- Published
Journal
Recherches économiques de LouvainISSN
0070-4518Publisher
De Boeck SupérieurExternal DOI
Issue
1Volume
72Page range
19-48Department affiliated with
- Economics Publications
Full text available
- No
Peer reviewed?
- Yes
Legacy Posted Date
2015-12-06Usage metrics
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