Stochastic optimal budget decision for advertising considering uncertain sales responses

Du, Rong; Hu, Qiying; Ai, Shizhong

doi:10.1016/j.ejor.2006.02.031

Cited by 29 publications

(8 citation statements)

References 13 publications

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“…In uncertain markets where the response function is not known, stochastic models of the advertising budget decision have been developed to help with budget allocation decisions (Holthausen and Assmus 1982, Du et al 2007, Yang et al 2013. Holthausen and Assmus (1982) presented a model for allocating the advertising budget to market segments when sales response to advertising is uncertain.…”

Section: Advertising Responsementioning

confidence: 99%

“…In this line of work, an efficient frontier is defined over expected profits, and the advertiser chooses the optimal allocation based on her preference function. Du et al (2007) considered the advertising budget decision with uncertain advertising response as a Markov decision process and developed a stochastic model with two-dimension state variables to solve it. Sethi (1973) examined the optimal advertising schedule problem, extending the dynamic version of the Vidale-Wolfe advertising model.…”

Section: Advertising Responsementioning

confidence: 99%

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Optimal Budget Allocation Across Search Advertising Markets

Yang

Zeng

Yang

et al. 2015

INFORMS Journal on Computing

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O ne critical operational decision facing online advertisers when they engage in sponsored search advertising is concerned with the allocation of a limited advertising budget. In particular, dealing with multi-keyword search markets over multiple decision periods poses significant decision-making challenges. In this paper, we develop a novel budget allocation optimization model with multiple search advertising markets and a finite time horizon. One key element of our modeling work is developing a customized advertising response function when considering distinctive features of sponsored search, including the quality score and the dynamic advertising effort. We derive a feasible solution to our budget model and study its properties. Computational experiments are conducted on real-world data to evaluate our budget model and perform parameter sensitivity analysis. Experimental results indicate that our budget allocation strategy significantly outperforms several baseline strategies. In addition, the identified properties derived from the solution process illuminate critical managerial insights for advertisers in sponsored search.

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Section: Advertising Responsementioning

confidence: 99%

Section: Advertising Responsementioning

confidence: 99%

Optimal Budget Allocation Across Search Advertising Markets

Yang

Zeng

Yang

et al. 2015

INFORMS Journal on Computing

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“…The research on competitive advertising is limited and mainly focuses on empirical study. Wang and Wu [41] presented an empirical study on the Lanchester model of combat for competitive advertising decisions. Chaabane et al [6] investigated the effect of competitive advertising within store flyers on both manufacturers and retailers.…”

Section: 1mentioning

confidence: 99%

Advertising games on national brand and store brand in a dual-channel supply chain

Yang¹,

Ji²,

Chen³

2018

Journal of Industrial &Amp; Management Optimization

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This paper investigates a dual-channel supply chain, where one national brand manufacturer has both online and retail channels. The retailer is assumed to sell the national brand as well as his store brand to customers. The following five scenarios are considered: Centralized case, Stackelbergmanufacturer (SM) game, Stackelberg-retailer (SR) game, Nash-manufacturer (NM) game and Nash-retailer (NR) game. The paper derives the conditions under which the supply chain members would like to participate in cooperative advertising. The results show that in the Stackelberg games, the leader in Stackelberg game will reduce its investment in cooperative advertising when it gets a lower marginal profit from the cooperative advertising; In addition, the dual-channel supply chain can get a higher profit if it is dominated by the member whose marginal profit from cooperative advertising is higher. In the Nash games, in order to increase the whole supply chain's profit, the member who has a higher marginal profit in the cooperative advertising should give up the decision power on cost-sharing rate voluntarily. In addition, if there exists a leader in the supply chain, the cooperative advertising will be higher. Furthermore, the introduction of store brand will trigger the manufacturers antipathy for the low profit.

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“…But, as far as we know, a stochastic version of the MAB problem has not yet been addressed. Thus, for example, [13] considers a multiproduct model but for a single period and with a deterministic approach, [35] considers a multiperiod model but for a single product and also with a deterministic approach, [15] considers a stochastic multiperiod model but for a single product. However, as we will illustrate in our case study, a relevant expected profit improvement can be achieved if the parameter uncertainty in MAB models is taken into account (stochastic models) compared to ignoring it (deterministic models).…”

Section: Introductionmentioning

confidence: 99%

“…In [3] a Bayesian dynamic linear model is used for studying the wear out effects of different themes of advertising (for example, price advertisements versus product advertisements) in order to improve the effectiveness of advertising budget allocation across different themes. In [15] a Markov decision process approach is used for modeling the multistage advertising budgeting problem. Other approaches that have been proposed to solve the advertising budgeting problem under uncertainty are based on multicriteria fuzzy optimization [28], chance constraint goal optimization [5] and robust optimization [2].…”

Section: Introductionmentioning

confidence: 99%