Séminaire sur les jeux dynamiques et les applications (Chaire de théorie des jeux et gestion et GERAD)

Advertising, goodwill, and the Veblen effect

Régis Chenavaz – KEDGE Business School, France

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Nº de réunion : 962 7774 9870
Code secret : 285404

The increase of demand in price, an exception to the law of demand, is known as the Veblen effect. We show that advertising and goodwill play an important role in the Veblen effect. By employing optimal control theory, we capture the evolution of the variables over time which may exhibit the Veblen effect where price and demand move in the same direction. Incorporating this dynamics into firms’ decisions has a promising impact on long-term profit. Consequently, it may even trigger a slew of studies on product line extension, competition and pricing by allowing firms to control their status.