Proceedings of the 2022 7th International Conference on Financial Innovation and Economic Development (ICFIED 2022)

Game-theoretic Analysis for the Trade-Off Between R&D and Marketing in Chinese Cosmetic Market

Authors
Yi Cao1, , Xinyan Qian2, , Dawei Zeng3, *,
1Erasmus School of Economics, Erasmus University Rotterdam, Rotterdam 3062 PA, Netherlands
2Canada Kent School, Toronto M6H 4B4, Canada
3School of Management, Xiamen University, Xiamen 361005, China

These authors contributed equally.

*Corresponding author. Email: 13720182200566@stu.xmu.edu.cn
Corresponding Author
Dawei Zeng
Available Online 26 March 2022.
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.

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Volume Title
Proceedings of the 2022 7th International Conference on Financial Innovation and Economic Development (ICFIED 2022)
Series
Advances in Economics, Business and Management Research
Publication Date
26 March 2022
ISBN
978-94-6239-554-1
ISSN
2352-5428
DOI
10.2991/aebmr.k.220307.087How to use a DOI?
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  -