Quality effects in different advertising models - An impulse control approach

In this paper, we integrate quality as a control variable in three classical dynamic optimal control models of advertising, namely, Nerlove–Arrow, Vidale–Wolfe and Ozga models. Quality refers to design quality, which may deteriorate over time. We assume that decisions in quality improvement can only be made at some exogenously given instants of time, and consequently we use the formalism of impulse optimal control to determine optimal advertising and quality investments. We report numerical results for the three models and discuss the impact of adding quality on the results.

[1]  K. Arrow,et al.  OPTIMAL ADVERTISING POLICY UNDER DYNAMIC CONDITIONS , 1962 .

[2]  Klaus Conrad.  Quality, Advertising and the Formation of Goodwill under Dynamic Conditions , 1985 .

[3]  Fouad El Ouardighi,et al.  Quality improvement and goodwill accumulation in a dynamic duopoly , 2006, Eur. J. Oper. Res..

[4]  Georges Zaccour,et al.  A survey of game-theoretic models of cooperative advertising , 2014, Eur. J. Oper. Res..

[5]  M. L. Vidale,et al.  An Operations-Research Study of Sales Response to Advertising , 1957 .

[6]  Jian Huang,et al.  Recent developments in dynamic advertising research , 2012, Eur. J. Oper. Res..

[7]  R. Hartl,et al.  Dynamic Optimal Control Models in Advertising: Recent Developments , 1994 .

[8]  Anand Nair,et al.  Dynamics of competing with quality- and advertising-based goodwill , 2006, Eur. J. Oper. Res..

[9]  U. Buscher,et al.  Cooperative Advertising Models in Supply Chain Management: A Review , 2014 .

[10]  S. Ożga,et al.  Imperfect Markets Through Lack of Knowledge , 1960 .

[11]  Georges Zaccour,et al.  Cooperative Advertising in Marketing Channels: Game Theoretic Analyses , 2013 .

[12]  Fouad El Ouardighi,et al.  A Dynamic Game of Operations and Marketing Management in a Supply Chain , 2008, IGTR.

[13]  Charles S. Tapiero,et al.  Optimal Product Quality And Advertising , 1981 .

[14]  Alain Haurie,et al.  Two-Time Scale Controlled Markov Chains: A Decomposition and Parallel Processing Approach , 2007, IEEE Transactions on Automatic Control.

[15]  S. Sethi.  Dynamic Optimal Control Models in Advertising: A Survey , 1977 .