Optimal Control of an Oligopoly Model of Advertising

Proceedings of the 13th IFAC Symposium on Information Control Problems in Manufacturing, INCOM 2009

UC Davis Graduate School of Management Research Paper No. 11-09

7 Pages Posted: 13 Apr 2009

See all articles by Ashutosh Prasad

Ashutosh Prasad

University of California, Riverside (UCR)

Suresh Sethi

University of Texas at Dallas - Naveen Jindal School of Management

Prasad A. Naik

University of California, Davis

Date Written: April, 10 2009

Abstract

We examine an oligopoly model of advertising competition where each firm's market share depends on its own and its competitors' advertising decisions. A differential game model is developed and used to derive the closed-loop Nash equilibrium under symmetric as well as asymmetric competition. We obtain explicit solutions under certain plausible conditions, and discuss the effects of an increase in the number of competing firms on advertising expenditure, market share and profitability.

Keywords: Sethi model, advertising, dynamic games, game theory, differential games, optimal control, close-loop Nash equilibrium, oligopoly, Feedback Nash equilibrium

JEL Classification: C61, C72, C73, D43, L13, M37

Suggested Citation

Prasad, Ashutosh and Sethi, Suresh and Naik, Prasad A., Optimal Control of an Oligopoly Model of Advertising (April, 10 2009). Proceedings of the 13th IFAC Symposium on Information Control Problems in Manufacturing, INCOM 2009, UC Davis Graduate School of Management Research Paper No. 11-09, Available at SSRN: https://ssrn.com/abstract=1376394

Ashutosh Prasad

University of California, Riverside (UCR)

900 University Avenue
Riverside, CA CA 92521
United States

Suresh Sethi (Contact Author)

University of Texas at Dallas - Naveen Jindal School of Management ( email )

800 W. Campbell Road, SM30
Richardson, TX 75080-3021
United States

Prasad A. Naik

University of California, Davis ( email )

One Shields Avenue
Apt 153
Davis, CA 95616
United States

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