On the generalizability of advertising pulsation monopoly results to an oligopoly

Article Abstract:

An analytical procedure for modeling and examining sales response to advertising pulsation for competitive markets of mature products in continuous time for discrete, piecewise policies that permit unequal cycle lengths is presented for the first time. Using Nash equilibrium and numerical analysis, it is shown that there is an oligopolistic, as opposed to a monopolistic, rational for advertising at a constant rate in the presence of concave response functions or advertising according to a pulsing policy in the presence of S-shaped response functions.

Advertising Management, Analysis, Usage, Economic aspects, Advertising, Marketing management, Monopolies, Oligopolies

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Theoretical foundation

Article Abstract:

A Lanchester model of two competing firms based on game theory is employed to determine which of two advertising models perform better: pulsating or uniform spending. Specifically, it is shown that the Uniform Advertising Policy is optimal for competing firms with a concave or linear response function. In such monopolistic or duopolistic situations, Advertising Pulsing/Maintenance Policy works best when both firms have convex response functions. However, when only one firm exhibits a convex response function, linear programming must be applied.

Models, Linear programming

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Empirical applications and findings

Article Abstract:

The use of linear programming to determine the optimal advertising spending policy in markets where firms have convex response functions is discussed. Specifically, a linear programming application is presented to support the assertion that 'subgames of alternating pulsing competition and matching pulsing competition may not have saddle points at the corners' if one firm exhibits a convex response function. In addition, the Lanchester model is applied to empirical data to validate its use for duopolies.

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