Closed-loop advertising strategies in a duopoly
Article Abstract:
The problem of finding an optimal advertising strategy for optimum discounted profits is solved through the use of the Lanchester model. This framework allows for the description of market dynamics in which two firms compete for customers through advertising. Open-loop and closed-loop strategies are developed and the relationship between them is explained. The closed-loop solution is found to be a global Nash equilibrium that is time-variant and linearly reliant on the actual market share. The closed-loop advertising spending is shown to be proportional to the open-loop advertising budget and to the square of the actual market share of the competitor. The model is then applied to data on the Cola War between 1968 and 1984.
Publication Name: Management Science
Subject: Business, general
ISSN: 0025-1909
Year: 1997
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Optimal advertising policies for diffusion models of new product innovation in monopolistic situations
Article Abstract:
Optimal advertising strategies for new product diffusion models are discussed. The introduction of a new consumer durable in a monopolistic market is considered. The evolution of sales is modeled by a flexible diffusion model. Allowances are made for discounts of future revenue streams, but repeat sales and possible entry of rivals are disregarded. The structure of an optimal advertising strategy is qualitatively characterized using methods of optimal control theory.
Publication Name: Management Science
Subject: Business, general
ISSN: 0025-1909
Year: 1988
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A new product adoption model with price, advertising, and uncertainty
Article Abstract:
New product adoption is modeled as a function of the interaction among price, advertising and uncertainty. The adoption process is characterized as a two-stage one, using a simple epidemic-type model of information dissemination to explain the awareness stage, and employing a risk-aversion model to account for the adoption stage. As uncertainty declines, so does risk and the perceived value of the product rises, allowing for a higher selling price.
Publication Name: Management Science
Subject: Business, general
ISSN: 0025-1909
Year: 1985
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