In their study of cigarette advertising, Roberts and Samuelson (1988) found that the advertising of a particular brand affects overall market demand for cigarettes but does not affect the brand’s share of market sales. Suppose the demand for brand i is qi = a + b(Ai + Aj)0.5, where Ai is brand i’s advertising expenditure. Brand i’s profit function is πi = pi (a + b(Ai + Aj)0.5) – Ai.a. Does brand B’s advertising expenditure affect A’s market share, qA/(qA + qB)?b. In terms of a and b, what are the Nash equilibrium advertising expenditures? How does an increase in b affect the equilibrium expenditures?
In their study of cigarette advertising, Roberts and Samuelson (1988) found that the advertising of a particular brand affects overall market demand”
by | Mar 12, 2022 | Uncategorized
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