We revisit the relationship between market power and firms’ investment incentives in a noncooperative differential oligopoly game where firms sell differentiated goods and invest in advertising to increase the brand equity of their respective goods. The feedback equilibrium obtains under open-loop rules, and aggregate expenditure on goodwill takes an inverted-U shape under both Cournot and Bertrand behaviour, provided product differentiation is sufficiently high. Total industry expenditure is higher under Cournot competition.
Lambertini, L., Zaccour, G. (2015). Inverted-U Aggregate Investment Curves in a Dynamic Game of Advertising. ECONOMICS LETTERS, 132, 34-38.
Inverted-U Aggregate Investment Curves in a Dynamic Game of Advertising
LAMBERTINI, LUCA;
2015
Abstract
We revisit the relationship between market power and firms’ investment incentives in a noncooperative differential oligopoly game where firms sell differentiated goods and invest in advertising to increase the brand equity of their respective goods. The feedback equilibrium obtains under open-loop rules, and aggregate expenditure on goodwill takes an inverted-U shape under both Cournot and Bertrand behaviour, provided product differentiation is sufficiently high. Total industry expenditure is higher under Cournot competition.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
