Optimal Advertising with Stochastic Demand

A stochastic, sequential model is developed to determine optimal advertising expenditures as a function of product maturity and past advertising. Random demand for the product depends upon an aggregate measure of current and past advertising called “goodwill,” and the position of the product in its life cycle measured by sales-to-date. Conditions on the parameters of the model are established that insure that it is optimal to advertise less as the product matures. Additional characteristics of the optimal advertising policy are also established.

• 저널Management Science · 29(1) · 106–117
• 토픽Consumer Market Behavior and Pricing · Marketing
• DOI10.1287/mnsc.29.1.106
• 저자George E. Monahan