Applications to Marketing推荐.pdfVIP

Chapter 7 Application s t o Marketin g Over th e years, a number of applications of optimal control theory have been made t o th e field of marketing . Many of these applications deal with th e problem of finding or characterizing an optimal advertising price over time . Other s deal with th e problem of determining optimal price and quality over time , in addition t o or without advertising . The reader is referred t o Sethi (1977a) and Feichtinger, Hartl , and Sethi (1994) for comprehensive reviews on dynamic optimal control problems in advertising and related problems . In thi s chapter we discuss optimal advertising policies for two of th e well-known models called th e Nerlove- Arrow model and th e Vidale-Wolfe model . To describe th e specific problems imder consideration, let us assimie that a firm has some way of knowing or estimating th e dynamics of sales and advertising . Such knowledge is expressed in term s of a differential equation with goodwill or rat e of sales as th e stat e variable and the rat e of advertising expenditure s as th e control variable . We assume that th e firm wishes t o maximize an objective function (the criterion function) which refiects its profit motives expressed in term s of sales and advertising rates . Th e optimal control problem is t o find an advertising policy which maximizes th e firms objective fimction . The plan of thi s chapter is as follows. Section 7. 1 wiU cover th e Nerlove-Arrow model as well as a nonlinear extension of it . Section 7.2 deals with th e Vidale-Wolfe