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Working Papers (2002), ESSEC Business School

Advertising and Quality Decisions over Time

Abstract: In this paper, we propose a pull and push dynamic model involving one attraction factor (advertising) and one rejection factor (quality) to represent market share competition. The analysis of the proposed model in the monopoly and the duopoly contexts respectively provides qualitative results for the optimal price, advertising and quality mix. A numerical algorithm for the resolution of differential games involving interdependent control variables is introduced to efficiently solve the optimal advertising, quality and pricing values over time. In particular, the comparative numerical study reveals contrasting strategies within and between the duopoly and the monopoly market structures.

EL OUARDIGHI, F. and PASIN, F. (2002). Advertising and Quality Decisions over Time. ESSEC Business School.