Advertising in a Cournot duopoly with product differentiation and linear demands
DOI:
https://doi.org/10.26694/2764-1392.8460Keywords:
Persuasive advertising, Industrial Organization, Microeconomics, Cournot duopoly, Product differentiationAbstract
This paper introduces advertising spending in a symmetric Cournot duopoly with differentiated products, demand functions, and linear cost functions, with the aim of analyzing the impact of advertising on equilibrium quantities, prices, and profits. The results demonstrate that advertising spending will have a positive impact on equilibrium variables only if firms are efficient enough, or if the maximum prices consumers are willing to pay for products are high enough in markets with less product differentiation. In addiction, it has also been shown that the greater the efficiency of firms, or the maximum price consumers are willing to pay for the products, the impact of advertising is positive for an increasing range of product differentiation, encompassing all degrees of differentiation at the limit where efficiency goes to infinity.
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