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Estimation Uncertainty and Optimal Advertising Decisions

Author

Listed:
  • A. Aykac

    (International Management Institute)

  • M. Corstjens

    (INSEAD, Fontainebleau, France)

  • D. Gautschi

    (INSEAD, Fontainebleau, France)

  • I. Horowitz

    (College of Business Administration, University of Florida, Gainesville, Florida 32611)

Abstract

In this paper we develop a normative model that is built on an empirically relevant foundation. We observe that decision makers, among them advertisers, rely on estimated relationships in reaching resource allocation decisions, and we investigate the normative implications of this process. In particular, we explore the effects of uncertainty stemming from the use of sample estimates of population parameters. In general, we find that ignoring this estimation-related uncertainty leads to suboptimal decisions.

Suggested Citation

  • A. Aykac & M. Corstjens & D. Gautschi & I. Horowitz, 1989. "Estimation Uncertainty and Optimal Advertising Decisions," Management Science, INFORMS, vol. 35(1), pages 42-50, January.
    • Handle: RePEc:inm:ormnsc:v:35:y:1989:i:1:p:42-50
    DOI: 10.1287/mnsc.35.1.42
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    Citations

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    Cited by:

    1. Horowitz, I. & Thompson, P., 1995. "The sophisticated decision maker: All work and no pay?," Omega, Elsevier, vol. 23(1), pages 1-11, February.
    2. Goddard, Ellen W, 1995. "Optimal Investment in Generic Advertising and Research: The Case of the Canadian Supply Managed Egg Market Under Partial Trade Liberalization," Working Papers 244802, University of Guelph, Department of Food, Agricultural and Resource Economics.
    3. K. M. Chyc & E. W. Goddard, 1994. "Optimal investment in generic advertising and research: The case of the Canadian supply-managed egg market," Agribusiness, John Wiley & Sons, Ltd., vol. 10(2), pages 145-166.
    4. 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.
    5. Mesak, Hani Ibrahim & Bari, Abdullahel & Lian, Qin, 2015. "Pulsation in a competitive model of advertising-firm's cost interaction," European Journal of Operational Research, Elsevier, vol. 246(3), pages 916-926.
    6. Mesak, Hani I., 1999. "On the generalizability of advertising pulsation monopoly results to an oligopoly," European Journal of Operational Research, Elsevier, vol. 117(3), pages 429-449, September.
    7. Singfat Chu & Hean Keh, 2006. "Brand value creation: Analysis of the Interbrand-Business Week brand value rankings," Marketing Letters, Springer, vol. 17(4), pages 323-331, December.

    More about this item

    Keywords

    marketing; advertising;

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