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Auditing Marketing Budget Allocation with Hindsight Regret

Author

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  • Nilavra Pathak
  • Olivier Jeunen
  • Eric Lambert

Abstract

Organizations routinely make strategic budget allocations under operational constraints, but often lack a principled way to assess whether realized allocations were close to the best feasible choices in hindsight. We present a retrospective auditing framework based on hindsight regret, defined as the opportunity cost of the realized allocation relative to a constraint-faithful benchmark under the same budget and stability guardrails. The framework estimates regime-specific spend--response functions from historical logs, computes feasible hindsight allocations via constrained optimization, and propagates uncertainty through Monte Carlo evaluation to produce regret distributions, expected lift, and probability-of-improvement summaries. This separates allocation inefficiency from uncertainty in the estimated response surfaces. Experiments on real marketing allocation logs show that the framework yields interpretable post-hoc diagnostics and reveals a practical trade-off between allocation flexibility and detectability: moderate feasible reallocations often capture most measurable gain, while larger shifts move into weak-support regions with higher uncertainty. The result is a practical method for auditing historical budget decisions when online experimentation is costly or infeasible.

Suggested Citation

  • Nilavra Pathak & Olivier Jeunen & Eric Lambert, 2026. "Auditing Marketing Budget Allocation with Hindsight Regret," Papers 2604.25977, arXiv.org, revised Apr 2026.
  • Handle: RePEc:arx:papers:2604.25977
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    References listed on IDEAS

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