The unique equilibrium in a model of sales with costly advertising

We demonstrate that the Varian (1980) model of sales has a unique Nash equilibrium when firms incur costly advertising to compete for informed consumers. The equilibrium is symmetric. In particular, with costly advertising, the asymmetric equilibria highlighted by Baye et al. (1992) do not arise.

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Year of publication:	2014
Authors:	Arnold, Michael A. ; Zhang, Lan
Published in:	Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 124.2014, 3, p. 457-460
Publisher:	Elsevier
Subject:	Advertising \| Sales \| Unique equilibrium \| Price dispersion

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Type of publication:	Article
Classification:	D4 - Market Structure and Pricing ; D83 - Search, Learning, Information and Knowledge ; L19 - Market Structure, Firm Strategy, and Market Performance. Other ; L89 - Industry Studies: Services. Other
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011041754