Profiting From Uncertainty

Kalyan Raman and Hubert Gatignon
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Kalyan Raman: University of Michigan
Hubert Gatignon: INSEAD

Chapter 4 in Quantitative Marketing and Marketing Management, 2012, pp 501-515 from Springer

Abstract: 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.

Keywords: Advertising Budget Allocation; Sales Response to Advertising; Uncertainty (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-8349-3722-3_24

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

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