Inverted-U aggregate investment curves in a dynamic game of advertising

Luca Lambertini, Georges Zaccour

We revisit the relationship between market power and firms' investment incentives in a noncooperative differential oligopoly game in which 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.

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Year of publication:	July 4, 2014
Authors:	Lambertini, Luca ; Zaccour, Georges
Publisher:	Bologna, Italy : Alma Mater Studiorum - Università di Bologna, Department of Economics
Subject:	Goodwill \| Oligopoly \| Advertising \| Differential games \| Schumpeterian hypothesis \| Werbung \| Oligopol \| Spieltheorie \| Game theory \| Dynamisches Spiel \| Dynamic game \| Investition \| Investment \| Duopol \| Duopoly

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