Evaluation and strategy study on online advertising mode of duopoly competitive enterprises based on price discrimination

In a duopoly, it is important for network marketing firms to make strategic decision on online advertising. This paper focuses on two types of online advertising, mass advertising and targeted advertising. Firstly, on the basis of advertising cost and consumer characteristics, the paper gives utility functions of user groups, and space and positioning of products. Then, two types of advertising are evaluated under the condition of uniform distribution and non-uniform distribution. Finally, based on the evaluation results, the probability of targeted adverting and the issues of selecting strategies are studied. The results show that: 1) The investment in targeted advertising benefits the enterprise, but the mass advertising simultaneously reduces the profits of these two competitive companies, which makes these two companies into a prisoner's dilemma whether consumers are evenly distributed or non-uniformly distributed. In addition, implementing price discrimination is always superior to non-discriminatory price. 2) The marginal delivery intensity of advertising plays a dual-directional adjustment. The placement of targeted advertising is not always beneficial. 3) When the cost of targeted advertising is too high, enterprises should adopt a defensive strategy. 4) The number of targeted advertising issued when discriminating pricing is always higher than non-discriminatory pricing. © 2020, Editorial Office of Control and Decision. All right reserved.