Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/302462 
Year of Publication: 
2024
Series/Report no.: 
24th Biennial Conference of the International Telecommunications Society (ITS): "New bottles for new wine: digital transformation demands new policies and strategies", Seoul, Korea, 23-26 June, 2024
Publisher: 
International Telecommunications Society (ITS), Calgary
Abstract: 
When firms use advertising to differentiate their products and increase consumer appreciation of their products, the strategy, i.e., price or quantity, depends on the degree of product differentiation and the magnitude of advertising costs. If advertising costs in Bertrand competition are very much lower than advertising costs in Cournot competition, the firms will choose Bertrand competition. If advertising costs in Bertrand competition are comparable to advertising costs in Cournot competition, both firms will choose Cournot competition. If advertising costs in Bertrand competition are lower than those in Cournot competition, and differentiation is, to some extent greater, firms adopt different strategies each other. This is because firms take advantage of the different advertising effectiveness of competitors under the conditions of cost and differentiation increase profitability. There is also a mixed strategy option under these conditions. Furthermore, the differentiation strategy with advertising increases firms' profits and increases consumer surplus and total surplus compared to the case without advertising.
Subjects: 
Online media advertising
Mass media advertising
differentiation strategy
Cournot competition
Bertrand competition
Duopoly model
JEL: 
D43
L13
M37
Document Type: 
Conference Paper

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