We show that market response uncertainty can be judiciously harnessed in determining the optimal advertising budget and spending pattern to improve the expected profitability of a firm. Using stochastic optimal control, we derive the optimal feedback advertising policy to accomplish this objective, and establish that the optimal advertising policy increases profitability at a rate directly proportional to the error variance.
CITATION STYLE
Raman, K., & Gatignon, H. (2012). Profiting from uncertainty. In Quantitative Marketing and Marketing Management: Marketing Models and Methods in Theory and Practice (Vol. 9783834937223, pp. 501–515). Gabler Verlag. https://doi.org/10.1007/978-3-8349-3722-3_24
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