Technical Note—A Pure Birth Model of Optimal Advertising with Word-of-Mouth

George E. Monahan
Additional contact information
George E. Monahan: Washington University in St. Louis

Marketing Science, 1984, vol. 3, issue 2, 169-178

Abstract: A stochastic, dynamic model of advertising, which incorporates both advertising and word-of-mouth effects, is formulated. The time between the acquisition of new customers is assumed to be random. The distribution of the time until the firm obtains a new customer depends upon the rate of advertising expenditures and upon a word-of-mouth parameter. The problem of choosing the rate of advertising expenditures so as to maximize long-run expected profit is formulated as a continuous-time Markov decision chain. The impact of changes in various parameters of the model on optimal advertising decisions is studied.

Keywords: optimal advertising; word-of-mouth; Markov decision chain (search for similar items in EconPapers)
Date: 1984
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://dx.doi.org/10.1287/mksc.3.2.169 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:3:y:1984:i:2:p:169-178

Access Statistics for this article

More articles in Marketing Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().