Momentum in Dynamic Contests

30 Pages Posted: 1 Dec 2015  

Nicolas de Roos

University of Sydney

Yianis Sarafidis

Charles River Associates (CRA)

Date Written: November 28, 2015

Abstract

We consider a two-player advertising race subject to momentum. Momentum is modelled as a complementarity between current and past campaign spending in a way that is reminiscent of models of addiction and habit formation: the more effective a player’s past spending has been, the more effective her future spending will be. For symmetric races in which the effectiveness of spending is of the Cobb-Douglas form, we derive analytic solutions for the equilibrium path. Our theory rationalizes alternative campaign strategies including aggressive openings and the development of a war chest for a final campaign assault.

Keywords: momentum, differential games, advertising games, political campaigns

JEL Classification: C73, M37, P16

Suggested Citation

de Roos, Nicolas and Sarafidis, Yianis, Momentum in Dynamic Contests (November 28, 2015). Available at SSRN: https://ssrn.com/abstract=2696539 or http://dx.doi.org/10.2139/ssrn.2696539

Nicolas De Roos (Contact Author)

University of Sydney ( email )

University of Sydney
Sydney NSW 2006, NC
Australia

Yianis Sarafidis

Charles River Associates (CRA) ( email )

1201 F. St. NW
Ste. 700
Washington, DC 20004
United States

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