Mathematical Model of Multichannel Advertising Management with Continuously Distributed Lags

The dynamic model of optimal distribution of advertising costs on the planning period is analyzed. It is assumed that companies can use several media channels of different quality and influence on demand. We consider the delayed reaction of consumers to advertising and non-advertising factors. Unlike such classical dynamic optimization models as Nerlove-Arrow model, Vidal-Wolf model and their extensions, the proposed model takes into account accumulated effects of advertising of several media channels and previous sales. In the framework of the proposed model, we consider the problem of optimal control of advertising costs with a nonlinear Volterra integral equation, which is generated by the natural constraints. The theorem on existence of solution to this equation is proved. Also, we formulate the theorem on existence of solution to the total profit maximization problem for the planning period under restriction. The maximum principle is applied to the problem and the necessary conditions for constructing an optimal strategy are found.

Keywords

mathematical model; advertising strategy; Volterra equation; optimal control; maximum principle; existence of solution.

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