Bertrand-Cournot Comparison in a Mixed Duopoly with Advertisement

Abstract

We examine the Bertrand-Cournot comparison with advertisement in a differentiated mixed duopoly market, and compare with the social optimum. We show that not only both firms’ quantities but also both firms’ advertisements are higher (lower) in Cournot (Bertrand) than the social optimum. Thus, both firms engage in excessive (insufficient) advertisement in Cournot (Bertrand). We also show that despite lower both firms’ prices in Cournot, both firms’ profits and social welfare are strictly higher in Bertrand and thus, both firms prefer Bertrand to Counrnot.