Abstract
We show that market response uncertainty can be judiciously harnessed in determining the optimal advertising budget and spending pattern to improve the expected profitability of a firm. Using stochastic optimal control, we derive the optimal feedback advertising policy to accomplish this objective, and establish that the optimal advertising policy increases profitability at a rate directly proportional to the error variance.
Original language | English (US) |
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Title of host publication | Quantitative Marketing and Marketing Management |
Subtitle of host publication | Marketing Models and Methods in Theory and Practice |
Publisher | Gabler Verlag |
Pages | 501-515 |
Number of pages | 15 |
Volume | 9783834937223 |
ISBN (Electronic) | 9783834937223 |
ISBN (Print) | 3834930601, 9783834930606 |
DOIs | |
State | Published - Jul 1 2012 |
Keywords
- Advertising Budget Allocation
- Sales Response to Advertising
- Uncertainty
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)
- Business, Management and Accounting(all)