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Advertising and endogenous exit in a differentiated duopoly

Mantovani, A and Mion, G (2006) Advertising and endogenous exit in a differentiated duopoly .

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In 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.

Item Type: Other
Divisions : Surrey research (other units)
Authors :
Mantovani, A
Date : 2006
Uncontrolled Keywords : M37, advertising, product differentiation, endogenous exit, asymmetric equilibria, coordination games
Depositing User : Symplectic Elements
Date Deposited : 16 May 2017 15:33
Last Modified : 23 Jan 2020 10:42

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