ISSN:
1540-5915
Source:
Blackwell Publishing Journal Backfiles 1879-2005
Topics:
Economics
Notes:
In an advertising strategy, it is preferable to optimize a sequence of periodic decisions, rather than optimizing each period's decision separately. Thus, a dynamic technique such as optimal control, which is used in this study, should be employed. Necessary conditions, as inferred from a parsimonious advertising model, are tested using data from the tobacco industry. Parameter estimation involves the use of non-linear regression. The estimates permit trajectories of optimal advertising expenditures and optimal market shares to be constructed for filter cigarettes. When compared with the actual trajectories, the optimizing trajectories exhibit a striking correspondence to reality. Therefore, interesting results can be obtained using a simple model, provided the optimizing method takes into account the dynamic nature of managerial decision-making and provided powerful methods for estimating model parameters are used.
Type of Medium:
Electronic Resource
URL:
http://dx.doi.org/10.1111/j.1540-5915.1976.tb00695.x
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