000201535 001__ 201535 000201535 005__ 20250401105558.0 000201535 0247_ $$2doi$$a10.22004/ag.econ.201535 000201535 037__ $$a1803-2016-142477 000201535 041__ $$aeng 000201535 245__ $$aThe Duopolistic Firm with Endogenous Risk Control Case of Persuasive Advertising and Product Differentiation 000201535 260__ $$c2006-02 000201535 269__ $$a2006-02 000201535 300__ $$a43 000201535 336__ $$aWorking or Discussion Paper 000201535 490__ $$aFSWP 000201535 490__ $$a2006-01 000201535 520__ $$aIn this paper, a two-period game is constructed, where duopoly firms choose advertising strategies in the first period and compete in price or quantity in the second period by maximizing the value of firm equity. Using certainty equivalence, we demonstrate the impacts of uncertainty and modes of competition on duopoly firms' optimal pricing, production, and advertising strategies. Equilibrium price and quantity outcomes emerge as significantly different from the standard industrial organization model of profit maximization. It turns out that the common measurement of market power, the Lerner index, is generally mis-stated. In contrast to the literature, we also find that firms will optimally switch from quantity to price competition either when advertising costs are low, demand is high, or if idiosyncratic risk is reduced. A series of simulations confirm these findings. 000201535 650__ $$aFood Consumption/Nutrition/Food Safety 000201535 650__ $$aResearch and Development/Tech Change/Emerging Technologies 000201535 650__ $$aResearch Methods/Statistical Methods 000201535 700__ $$aWang, Shinn-Shyr 000201535 700__ $$aStiegert, Kyle W. 000201535 8564_ $$9fa70480c-bc24-43bf-a66c-82c1ebb8dbbc$$s347004$$uhttps://ageconsearch.umn.edu/record/201535/files/WP2006-01.pdf 000201535 887__ $$ahttp://purl.umn.edu/201535 000201535 909CO $$ooai:ageconsearch.umn.edu:201535$$pGLOBAL_SET 000201535 912__ $$nSubmitted by Abigail Porter (porte542@umn.edu) on 2015-04-13T18:39:38Z No. of bitstreams: 1 WP2006-01.pdf: 347004 bytes, checksum: 04417bf4efa32c9b567902f72137d63e (MD5) 000201535 912__ $$nMade available in DSpace on 2015-04-13T18:39:38Z (GMT). No. of bitstreams: 1 WP2006-01.pdf: 347004 bytes, checksum: 04417bf4efa32c9b567902f72137d63e (MD5) Previous issue date: 2006-02 000201535 913__ $$aLicense granted by Abigail Porter (porte542@umn.edu) on 2015-04-13T18:31:22Z (GMT): <center> <h2> Deposit Agreement </h2> </center> I represent that I am the creator of the digital material identified herein (&ldquo;Work&rdquo;). I represent that the work is original and that I either own all rights of copyright or have the right to deposit the copy in a digital archive such as AgEcon Search. I represent that in regard to any non-original material included in the Work I have secured written permission of the copyright owner (s) for this use or believe this use is allowed by law. I further represent that I have included all appropriate credits and attributions. I hereby grant the Regents of the University of Minnesota (&ldquo;University&rdquo;), through AgEcon Search, a non-exclusive right to access, reproduce, and distribute the Work, in whole or in part, for the purposes of security, preservation, and perpetual access. I grant the University a limited, non-exclusive right to make derivative works for the purpose of migrating the Work to other media or formats in order to preserve access to the Work. I do not transfer or intend to transfer any right of copyright or other intellectual property to the University. If the Deposit Agreement is executed by the Author�s Representative, the Representative shall separately execute the following representation: I represent that I am authorized by the Author to execute this Deposit Agreement on behalf of the Author. 000201535 980__ $$a1803 000201535 982__ $$gUniversity of Wisconsin>Department of Agricultural and Applied Economics>Food System Research Group>Working Papers