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On-Line and Adaptive Optimum Advertising Control by a Diffusion Approximation

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  • Charles S. Tapiero

    (Hebrew University, Jerusalem, Israel)

Abstract

We formulate a diffusion approximation to a stochastic advertising model of the Vidale-Wolfe type. This formulation allows solution of problems of optimum and on-line sales forecasting, parameter identification, and advertising control under uncertainty. For practical solutions, we suggest approximations and use simulation to forecast the probabilistic response of sales to an advertising program. Examples contrasting the stochastic process and the diffusion approximations approaches are included.

Suggested Citation

  • Charles S. Tapiero, 1975. "On-Line and Adaptive Optimum Advertising Control by a Diffusion Approximation," Operations Research, INFORMS, vol. 23(5), pages 890-907, October.
    • Handle: RePEc:inm:oropre:v:23:y:1975:i:5:p:890-907
    DOI: 10.1287/opre.23.5.890
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    Cited by:

    1. Lundgren, Tommy & Olsson, Rickard, 2008. "How Bad is Bad News? Assessing the Effects of Environmental Incidents on Firm Value," Sustainable Investment and Corporate Governance Working Papers 2008/1, Sustainable Investment Research Platform.
    2. Charles Tapiero, 1975. "Random Walk Models of Advertising, Their Diffusion Approximation, and Hypothesis Testing," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 4, number 2, pages 293-309, National Bureau of Economic Research, Inc.
    3. Lundgren, Tommy, 2007. "On the Economics of Corporate Responsibility," Sustainable Investment and Corporate Governance Working Papers 2007/3, Sustainable Investment Research Platform.
    4. Yanwu Yang & Baozhu Feng & Joni Salminen & Bernard J. Jansen, 2022. "Optimal advertising for a generalized Vidale–Wolfe response model," Electronic Commerce Research, Springer, vol. 22(4), pages 1275-1305, December.
    5. J. R. Dorroh & G. Ferreyra & P. Sundar, 1999. "A Technique for Stochastic Control Problems with Unbounded Control Set," Journal of Theoretical Probability, Springer, vol. 12(1), pages 255-270, January.

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