A Game-Theoretic Model of Strategic Interaction Using Advertising: Simulating the Evolution of the Cournot Nash Equilibrium under Different Competitive Scenarios

This paper examines the behaviour of two firms competing in a duopoly, where firms can influence demand through use of advertising. The paper simulates the strategic interaction of the two firms based on a game-theoretic Cournot analytical model. The evolution over time of the Nash equilibrium is graphically displayed for a number of different competitive scenarios. The results show that there exist threshold levels of advertising effectiveness at which duopoly behaviour bifurcates, that perfectly cooperative advertising can lead to competitive disadvantage, and that perfectly predatory advertising can lead to stagnation or losses.

Cooperative advertising and quantity discount in manufacturer-retailer supply chains

Purpose This paper aims to study the impact of existence and lack of discount on the relationships between one manufacturer and one retailer under the cooperative and the non-cooperative games and the members’ profits are compared. Design/methodology/approach In the first approach, the manufacturer’s price function is constant, and in the second approach, this price function is a decreasing function with respect to lot size. These approaches are modeled through three games structure, including two Stackelberg games and one cooperative game. Findings Some numerical instances comprising sensitivity analysis are provided, and then the members’ profits in different scenarios are compared. This paper reveals that in the presented models, whether the members are inclined to change their profits. Practical implications This paper presents a tool of decision-making for the type of relationships of members in two different circumstances, and an approach is also presented to maximize the members’ profit. Originality/value In this paper, the relationships between one manufacturer and one retailer are studied under six different circumstances, where pricing, cooperative advertising and inventory cost are considered simultaneously. Also, a different model is presented to make a balance in individual profits and gain more profit for each member compared to the cooperative and non-cooperative game.