Profiting from uncertainty

Kalyan Raman; Hubert Gatignon

doi:10.1007/978-3-8349-3722-3_24

Profiting from uncertainty

Kalyan Raman, Hubert Gatignon

Integrated Marketing Communications

Research output: Chapter in Book/Report/Conference proceeding › Chapter

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)
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	https://doi.org/10.1007/978-3-8349-3722-3_24
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)

Access to Document

10.1007/978-3-8349-3722-3_24

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