Impacts of advertising formation on adopting alternative fuel vehicles in a competitive market

As an environmentally friendly transport mode, alternative fuel vehicles (AFVs) largely address environmental concerns by reducing harmful gas emissions. However, research on the pricing and advertising strategies of AFVs, notably the optimal level of commitment to advertising by AFV retailers, is still largely overlooked. Therefore, this paper explores the pricing and advertising strategies of CV (conventional vehicle) and AFV retailers when considering different advertising formats, namely, informative and persuasive, within a competitive market. We compare the profits of the two competitive retailers to arrive at the optimal decisions, as well as the investment levels of advertising. In addition to the effectiveness of the two stated advertising strategies, we derive some practical and counterintuitive results where for instance, the optimal price of the AFV retailer is positively correlated with the utility of the two types of advertising. Additionally, investment advertising does not necessarily bring benefits to AFV retailers. This study offers both valuable theoretical and practical contributions to the pricing and marketing of AFVs.

Automated summary

This paper examines the pricing and advertising strategies of conventional vehicle (CV) and alternative fuel vehicle (AFV) retailers in a competitive market, considering different advertising formats. The study compares the profits and investment levels of the two retailers to determine optimal decisions. Results show that the optimal price of AFV retailers is positively correlated with the utility of advertising, and advertising investment does not necessarily benefit AFV retailers. This study offers valuable theoretical and practical insights for pricing and marketing AFVs.