Geodesic
Three-Stage Entry Game: the Strategic Effects of Advertising
Yugoslav journal of operations research, Tome 21 (2011) no. 2, p. 163 .

Voir la notice de l'article provenant de la source eLibrary of Mathematical Institute of the Serbian Academy of Sciences and Arts

This paper analyzes the effects of investment in advertising in the three-stage entry game model with one incumbent and one potential entrant firm. It is shown that if a game theory is applied, under particular conditions, advertising can be used as a strategic weapon in the market entry game. Depending on the level of the advertising interaction factor, conditions for over-investment in advertising for strategic purposes are given. Furthermore, three specific cases are analyzed: strictly predatory advertising, informative advertising and the case when one firm’s advertising cannot directly influence the other firm's profit. For each of them, depending on the costs of advertising and marginal costs, equilibrium is determined, and conditions under which it is possible to deter the entry are given. It is shown that if the value of the advertising interaction factor increases, power of using advertising as a weapon to deter entry into the market decreases. Thus, in the case of informative advertising, advertising cannot be used as a tool for deterring entry into the market, while in the case of predatory advertising, it can. Also, we have proved that in the case of strictly informative advertising an over-investment never occurs, while in the two other cases, there is always over-investment either to deter or to accommodate the entry.
Classification : 91A05, 91A20, 91A80
Keywords: Three-stage entry game, advertising, strategic investment, over-investment, market equilibrium, entry deterrence, entry accommodation. 
@article{YJOR_2011_21_2_a1,
     author = {Marija Kuzmanovi\'c and Vera Kova\v{c}evi\'c-Vuj\v{c}i\'c and Milan Marti\'c},
     title = {Three-Stage {Entry} {Game:} the {Strategic} {Effects} of {Advertising}},
     journal = {Yugoslav journal of operations research},
     pages = {163 },
     publisher = {mathdoc},
     volume = {21},
     number = {2},
     year = {2011},
     language = {en},
     url = {http://geodesic.mathdoc.fr/item/YJOR_2011_21_2_a1/}
}
TY  - JOUR
AU  - Marija Kuzmanović
AU  - Vera Kovačević-Vujčić
AU  - Milan Martić
TI  - Three-Stage Entry Game: the Strategic Effects of Advertising
JO  - Yugoslav journal of operations research
PY  - 2011
SP  - 163 
VL  - 21
IS  - 2
PB  - mathdoc
UR  - http://geodesic.mathdoc.fr/item/YJOR_2011_21_2_a1/
LA  - en
ID  - YJOR_2011_21_2_a1
ER  - 
%0 Journal Article
%A Marija Kuzmanović
%A Vera Kovačević-Vujčić
%A Milan Martić
%T Three-Stage Entry Game: the Strategic Effects of Advertising
%J Yugoslav journal of operations research
%D 2011
%P 163 
%V 21
%N 2
%I mathdoc
%U http://geodesic.mathdoc.fr/item/YJOR_2011_21_2_a1/
%G en
%F YJOR_2011_21_2_a1
Marija Kuzmanović; Vera Kovačević-Vujčić; Milan Martić. Three-Stage Entry Game: the Strategic Effects of Advertising. Yugoslav journal of operations research, Tome 21 (2011) no. 2, p. 163 . http://geodesic.mathdoc.fr/item/YJOR_2011_21_2_a1/