, Volume 100, Issue 8, pp 881–905 | Cite as

The dynamic investment strategy of online advertising based on spillover effect in duopoly competition market

  • Huini Zhou
  • Xiaoguang Gu
  • Li Li


Online advertising has become an important marketing instrument for many enterprises, and the impact of enterprises’ online advertising has been increasing rapidly. Significant long-term enterprise profits are dynamically determined by the continuous online advertisement investment strategies implemented. This paper formulates the investment cost function which reflects the characteristics and impacts of online advertising spillover effect to enterprises. Then the improved Lanchester model is used based on the investment cost function. According to the model, our research calculates the Nash equilibrium and does the numerical analysis under open-loop strategy and closed-loop strategy. (1) With the change of time and under the condition of open-loop and closed-loop, when the spillover effect level is higher, the investment amount on fixed-position online advertisement by the enterprises becomes opposite. (2) When the level of spillover effect is strong, the change in the market share of competitive enterprises is related to the initial market share under the condition of open-loop. Under the condition of closed-loop, the market share does not change in accordance with the level of spillover effect. (3) No matter under the open-loop strategy or the closed-loop strategy, the competitive enterprises with lower initial market share should increase the investment of the online advertising in order to attract new customers as early as possible.


Spillover effect Lanchester model Online advertising Open-loop strategy Closed-loop strategy 

Mathematics Subject Classification

68U20 91A25 91A35 



This research was supported by grants from the National Natural Science Foundation of China under Grant No. 71271115 and colleges and universities in Jiangsu Province plans to graduate research and innovation projects (No. KYCX17_0307).


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Copyright information

© Springer-Verlag GmbH Austria, part of Springer Nature 2018

Authors and Affiliations

  1. 1.School of Economics and ManagementNanjing University of Science and TechnologyNanjingChina
  2. 2.School of EconomicsNanjing UniversityNanjingChina

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