Essays on strategic behavior in oligopoly markets : advertising, output, and price competition
In the second study, we analyze the interaction between generic advertising, brand advertising, and firm profits when products are differentiated either vertically or horizontally and brand advertising is purely informative. That is, brand advertising lowers consumer search costs of identifying brand characteristics. The model demonstrates that firms can benefit from investing in brand advertising that lowers consumer search costs as well as from brand advertising that is purely persuasive. In addition, the results demonstrate that whether brand advertising is persuasive or informative, the outcome is more likely to be symmetric with horizontal differentiation than with vertical differentiation. This study shows that brand advertising is a strategic complement when persuasive and a strategic substitute when informative.
In the third study, we allow the choice of strategic variable, output and price, to be endogenous to the firm. We consider the case where one firm chooses output and the other firm chooses price, which we call a Cournot-Bertrand model. We provide a real world example of this "Cournot-Bertrand" behavior and show that the outcome can be a Nash equilibrium. Allowing the timing of play (early or late) as well as the strategic variable (output or price) to be endogenous, we demonstrate an outcome where one firm competes in output and the other firm competes in price can be a subgame perfect Nash equilibrium.
Advisor:Tremblay, Victor J.; Grosskopf, Shawna; Tremblay, Carol Horton; Emerson, Patrick
School:Oregon State University
School Location:USA - Oregon
Source Type:Master's Thesis
Keywords:generic advertising informative brand vertical product differentiation horizontal price competition quantity cournot model bertrand stackelberg oligopolies econometric models branding marketing
Date of Publication:04/30/2009