Optimal Control of the Vidale-Wolfe Advertising Model

Suresh Sethi

Operations Research, 1973, vol. 21, issue 4, 998-1013

Abstract: This paper considers an optimal-control problem for the dynamics of the Vidale-Wolfe advertising model, the optimal control being the rate of advertising expenditure to achieve a terminal market share within specified limits in a way that maximizes the present value of net profit streams over a finite horizon. First, the special polar cases of fixed and free end points are solved with and without an upper limit on advertising rate. The complete solution to the general problem is then constructed from these polar cases. The fixed-end-point case with no upper limit on the advertising rate is solved by using Green's theorem, while the other cases require additional use of switching-point analysis based on the maximum principle. The optimal control is characterized by a combination of bang-bang, impulse, and singular control, with the singular arc forming a turnpike.

Date: 1973
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