Advertising Expenditures in Coupled Markets— A Game-Theory Approach

Abstract

A game-theory approach to advertising expenditures is developed for a situation in which the markets for different products are coupled. By coupling we mean that advertising dollars spent in generating sales for one product have an influence on the sales of another product. Non-cooperative equilibrium solutions are obtained for the case of two competing companies each selling two products in coupled markets. An idealized example might be the case of two automobile manufacturers each of whom sells a low-priced and a high-priced car. Some special cases of the model are developed and extensions indicated.