A Game Model of Competition between a New Good Producer and a Remanufacturer Using Negative Advertising
Asia-Pacific Journal of Regional Science, Vol. 1, pp. 329-336, 2017
Posted: 27 Nov 2017
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A Game Model of Competition between a New Good Producer and a Remanufacturer Using Negative Advertising
Date Written: November 20, 2017
Abstract
In this paper we analyze the strategic interaction between a new good producer and a remanufacturer who use negative advertising on television (TV) to compete for a greater share of the market of a particular good. Government regulations limit the total amount of negative advertising time either firm can buy. The two rival firms choose how much negative advertising time to buy simultaneously. Our analysis of this duopolistic interaction leads to four results. First, we provide the normal form representation of the game between the new good producer and the remanufacturer. Second, we specify the best response functions of the two firms. Third, we determine the pure strategy Nash equilibrium of the game under study and point out that this equilibrium is unique. Finally, we ascertain the amount of negative advertising time the two firms would buy if they could come to a binding agreement to curtail this kind of advertising.
Keywords: Duopoly, Nash Equilibrium, Negative Advertising, New Good Producer, Remanufacturer
JEL Classification: L21, M37, D21
Suggested Citation: Suggested Citation