Game-theoretic Analysis for the Trade-Off Between R&D and Marketing in Chinese Cosmetic Market
These authors contributed equally.
- DOI
- 10.2991/aebmr.k.220307.087How to use a DOI?
- Keywords
- Chinese cosmetic market; Game theory; Marketing; R&D; Discount rates
- Abstract
A booming economy nurtured a bunch of new local brands in the Chinese cosmetic market, and Perfect Diary has stood out as a top player. However, it did more aggressive marketing than its international counterpart L’Oréal, which mainly focused on R&D. The mechanism behind their strategy making is worth studying. Therefore, this paper applies game theory and models the competition between two typical players as a static game and an infinitely repeated game to account for their actions and search for another possible outcome. Marketing effect, R&D effect, and discount rates of future payoffs are factors influencing players’ preferences. The result turns out that both games have an equilibrium: the static game ends up in a marketing war, while the repeated game has a pleasant equilibrium where both players adopt the anonymous grim trigger strategy, conditional on large discount rates. Furthermore, limited R&D capability and a strong marketing effect will make the equilibrium lame in the repeated game.
- Copyright
- © 2022 The Authors. Published by Atlantis Press International B.V.
- Open Access
- This is an open access article under the CC BY-NC license.
Cite this article
TY - CONF AU - Yi Cao AU - Xinyan Qian AU - Dawei Zeng PY - 2022 DA - 2022/03/26 TI - Game-theoretic Analysis for the Trade-Off Between R&D and Marketing in Chinese Cosmetic Market BT - Proceedings of the 2022 7th International Conference on Financial Innovation and Economic Development (ICFIED 2022) PB - Atlantis Press SP - 541 EP - 547 SN - 2352-5428 UR - https://doi.org/10.2991/aebmr.k.220307.087 DO - 10.2991/aebmr.k.220307.087 ID - Cao2022 ER -