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A Competition Model for Advertised Companies

Television advertising plays a major role in influencing people to purchase a company's product. In this project, we focus on the competition between two of the top beer companies, Budweiser and Coors Light. Both companies compete for beer drinkers as well as for television advertisements. To explain this competition, we develop an S-I-S (Susceptible-Infected-Susceptible) model utilizing five differential equations in which a susceptible person is an average beer drinker who watches television, and an infected person is one who purchases one of the two major brands. Two versions of this basic model are developed. The first version of the model takes into account only competition between Budweiser and Coors Light for beer drinkers. The second version takes into account both the competition for consumers as well as for television air time. One finds that under certain conditions, one of four states occur. In one state, neither Budweiser nor Coors Light attract any beer drinkers through television advertising. In two complementary cases one beer company influences many beer drinkers to purchase its particular brand. Finally, both beer companies influence enough beer drinkers to purchase their particular brand so that they both coexist in the television advertising market.

Article Number:
BU-1420-M

Year:
1997

Authors:
Victor A. Chacón, Occidental College
Patricia Fuentes, Loyola Marymount University
George F. Gonzalez, Rice University
Mario A. Mendieta, Universidad Autónoma Metropolitana-Iztapalapa

a_competition_model_for_advertised_companies.pdf