Optimizing Advertising Expenditures in a Dynamic Duopoly

Abstract

The marketing problem of determining the optimal timing of advertising expenditures over a finite planning horizon in a duopoly conflict situation is portrayed as a non-zero-sum differential game. Advertising expenditures are determined which optimize multiobjective performance indices in a Nash equilibrium sense. The dynamics of the market are described by utilizing an extension of the Vidale-Wolfe model of the sales response to advertising. A numerical algorithm is used to solve the model.