Strategic Rivalry for Market Share: A Contest Theory Approach to Dynamic Advertising Competition
The paper extends the Lanchester model of advertising competition to a setup in which the rate at which a firm attracts customers from its competitors depends not only on the firm’s own advertising effort, but also on the efforts of its rivals. Doing so enables us to use attraction rate specificatio...
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| Veröffentlicht in: | Dynamic games and applications 2018-09, Vol.8 (3), p.468-489 |
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| container_title | Dynamic games and applications |
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| creator | Dockner, Engelbert J. Jørgensen, Steffen |
| description | The paper extends the Lanchester model of advertising competition to a setup in which the rate at which a firm attracts customers from its competitors depends not only on the firm’s own advertising effort, but also on the efforts of its rivals. Doing so enables us to use attraction rate specifications borrowed from the economic theory of contests. Exploiting the fact that the sum of attraction rates equals one, we show that the differential equations that define the evolution of market shares in the Lanchester model can be considerably simplified. This makes the optimization problems of the firms considerably easier to analyze. Finallly, to illustrate how the above extensions work, three alternative specifications of attraction rates are studied: the Tullock ratio formulation, a linear transformation of the Tullock ratio, and a specification that incorporates an exogenous bias. |
| doi_str_mv | 10.1007/s13235-018-0242-1 |
| format | Article |
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| subjects | Advertising Attraction Communications Engineering Competition Computer Systems Organization and Communication Networks Differential equations Economic models Economic Theory/Quantitative Economics/Mathematical Methods Economics Game Theory Linear transformations Management Science Markets Mathematics Mathematics and Statistics Networks Operations Research Social and Behav. Sciences Specifications |
| title | Strategic Rivalry for Market Share: A Contest Theory Approach to Dynamic Advertising Competition |
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