IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v31y1985i5p622-633.html
   My bibliography  Save this article

An Analysis of Optimal Advertising Under Uncertainty

Author

Listed:
  • Dung Nguyen

    (Graduate School of Business, University of Pittsburgh, Pittsburgh, Pennsylvania 15260)

Abstract

We examine the firm's optimal advertising behavior under conditions of uncertainty. For the static one-period model, we show that the firm's attitude toward risk may be responsible for the potential divergence between advertising decisions under uncertainty and those under deterministic conditions. For the dynamic multi-period model, the ultimate impact of uncertainty on advertising is further complicated when the sales response function contains an unknown parameter, and the firm wishes to gain more information about it through experimentation. We demonstrate that whether it is optimal for the firm to experiment at an advertising rate higher, equal to, or lower than the myopic (one-period) level would depend on the specification of the response function. Finally, we offer some empirical evidence for our assumption of a quadratic sales response function, using time-series data of twelve major brands of cigarettes.

Suggested Citation

  • Dung Nguyen, 1985. "An Analysis of Optimal Advertising Under Uncertainty," Management Science, INFORMS, vol. 31(5), pages 622-633, May.
    • Handle: RePEc:inm:ormnsc:v:31:y:1985:i:5:p:622-633
    DOI: 10.1287/mnsc.31.5.622
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.31.5.622
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.31.5.622?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. James P. Gander, 2018. "Advertising Economics Under Uncertainty: An Alternative Approach," Working Paper Series, Department of Economics, University of Utah 2018_01, University of Utah, Department of Economics.
    2. Boutselis, Petros & McNaught, Ken, 2014. "Finite-Time Horizon Logistics Decision Making Problems: Consideration of a Wider Set of Factors," Chapters from the Proceedings of the Hamburg International Conference of Logistics (HICL), in: Blecker, Thorsten & Kersten, Wolfgang & Ringle, Christian M. (ed.), Innovative Methods in Logistics and Supply Chain Management: Current Issues and Emerging Practices. Proceedings of the Hamburg International Conferenc, volume 19, pages 249-274, Hamburg University of Technology (TUHH), Institute of Business Logistics and General Management.
    3. Danaher, Peter J. & Rust, Roland T., 1996. "Determining the optimal return on investment for an advertising campaign," European Journal of Operational Research, Elsevier, vol. 95(3), pages 511-521, December.

    More about this item

    Keywords

    advertising; decisions under uncertainty;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:31:y:1985:i:5:p:622-633. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.