Quality and Advertising in a Dynamic Duopoly

摘要: We investigate a differential duopoly game where each firm, through capital accumulation over time, may invest both in persuasive advertising campaigns aimed at increasing the willingness to pay of consumers and an R&D process level own product quality. In contrast with acquired wisdom based on static models, firm providing market inferior variety earn higher profits than rival. More this, we show that there exists range parameters wherein low quality commands monopoly power.