Abstract
A mathematical model approach is developed for the purpose of aiding advertising and marketing executives in advertising budget allocation decision-making in the face of a competitive environment. Two alternative model formulations are examined to study the dynamic market response to advertising expenditures. These embody numerous realistic characteristics of the advertising phenomenon including carry-over of past expenditures, diminishing returns and saturation effects, response decay in the absence of advertising and product diffusion effects. Through mathematical programming, the model determines the optimal advertising expenditures over a predetermined planning horizon under alternative constraint options (including competitive advertising assumptions). Illustrations of model applications are also presented.
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