Optimal media allocation decisions for generic advertisers

Abstract

Media allocation rules are derived for generic advertisers under a variety of market structures, marketing technologies and policy settings. The rules indicate that once the budget is set, allocation decisions can proceed strictly on the basis of media-specific advertising elasticities. The investment decision, however, is more complex. In addition to the media-specific advertising elasticities, generic advertisers need to take into account the price sensitivity of consumers, supply response, markup behaviour, advertising 'tax' incidence, policy setting, and competitive conditions. A general finding is that protection blunts the incentive to advertise collectively, while imperfect competition enhances the incentive.