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dc.contributor.authorBanerjee, B
dc.contributor.authorBandyopadhyay, S
dc.date.accessioned2022-02-11T10:15:34Z
dc.date.available2022-02-11T10:15:34Z
dc.date.issued2003
dc.identifier.citationBanerjee, B., & Bandyopadhyay, S. (2003). Advertising competition under consumer inertia. Marketing Science, 22(1). https://doi.org/10.1287/mksc.22.1.131.12843
dc.identifier.issn0732-2399
dc.identifier.urihttps://www.doi.org/10.1287/mksc.22.1.131.12843
dc.identifier.urihttp://hdl.handle.net/11718/25342
dc.description.abstractWe construct a multistage game-theoretic model of advertising and price competition in a differentiated products duopoly, in which proportions of consumers exhibit latent inertia in favor of repeat purchase. Advertising simultaneously plays the dual role in reducing such inertia through awareness and enhancing perceived brand value (persuasion). We derive the advertising price cross-effects and provide a theoretical reconciliation of the longstanding debate in the marketing literature regarding the impact of advertising on price sensitivity. We characterize the nature of equilibria under symmetry and show that when a large proportion of consumers exhibit inertial tendencies, then a multiplicity of equilibria exists. Marketing implications and comparative statics are discussed. Numerical simulations for asymmetric firms are presented, wherein we show that advertising is not a useful competitive tool for small firms. However, advertising spending by the large firm provides a halo effect for the average prices in the category, which has a positive externality on the small firm's profits. In the absence of the small brand advertising, larger brand shares encourage firms to allocate higher expenditures on advertising to enhance the perceived value of their brand, which in turn shore up the average prices in the industry from which all firms benefit.
dc.language.isoen_US
dc.publisherINST OPERATIONS RESEARCH MANAGEMENT SCIENCES
dc.relation.ispartofMarketing Science
dc.subjectconsumer inertia
dc.subjectduopoly
dc.subjectadvertising competition
dc.subjectgame theory
dc.titleAdvertising competition under consumer inertia
dc.typeArticle
dc.rights.licenseCC BY
dc.contributor.institutionauthorIndian Institute of Management Ahmedabad, Vastrapur, Ahmedabad, Gujarat 380015, India
dc.description.wosidWOS:000181884900007
dc.identifier.doi10.1287/mksc.22.1.131.12843
dc.identifier.endpage144
dc.identifier.startpage131
dc.identifier.issue1
dc.identifier.volume22


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