Understanding the Impact of Churn in Dynamic Oligopoly Markets

Automatica, 48, 2012, 2882-2887

6 Pages Posted: 22 Jun 2020

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: 2012

Abstract

We incorporate the effects of churn, which refers to customers switching to competing brands, in a dynamic model of advertising for oligopoly markets. Each firm’s market share depends not only on own and competitors’ advertising decisions, but also on market churn. Applying differential game theory, we derive a feedback Nash equilibrium under symmetric and asymmetric competition. We obtain explicit solutions and discover the counter-intuitive result that, as market churn increases, firms should decrease advertising rather than increase it to counteract the impact of churn.

Keywords: Advertising, Churn, Oligopoly, Differential Games, Optimization

JEL Classification: C61, M11, M20

Suggested Citation

Prasad, Ashutosh and Sethi, Suresh and Naik, Prasad A., Understanding the Impact of Churn in Dynamic Oligopoly Markets (2012). Automatica, 48, 2012, 2882-2887, Available at SSRN: https://ssrn.com/abstract=3611746 or http://dx.doi.org/10.2139/ssrn.3611746

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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