We consider an infinite horizon cooperative advertising differential game with nontransferable utility (NTU). The values of each firm are parametrized by a common discount rate and advertising costs. First we characterize the set of efficient solutions with a constant payoff weight. We show that there does not exist a constant weight that supports an agreeable cooperative solution. Then we consider a linear state-dependent payoff weight and derive an agreeable cooperative solution for a restricted parameter space.
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Figure 2.
(Non) cooperative strategies and values
Note: For $x \in [0, 1]$ and $\mathit{\boldsymbol{\rho}} = (\frac{3}{4}, 1)$ the figure illustrates the noncooperative $\phi_i(x)$ and cooperative strategies $\sigma_i(x)$ (top panels) as well as noncooperative $D_i(x)$ and cooperative values $A_i(x)$ (bottom panels).
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