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

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

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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 Cargo Net 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 Sweaters to stagnation or losses.