Open-Loop Nash Equilibrium in Erickson’s Oligopoly Model.

Abstract

Abstract We deal with the oligopoly model introduced by Gary M. Erickson in 2009 to describe dynamic advertising competition. In the original article the feedback Nash equilibrium and the steady-state sales are characterized. Here, we analyze the same model under the open-loop information structure assumption, we obtain a Nash equilibrium and we prove that this is different than the feedback one. In the symmetric instance of the model we can compare the equilibria in the two information structures and we find that the open-loop Nash equilibrium requires greater advertising efforts and leads to higher steady-state sale levels.