Optimal Control of the Vidale-Wolfe Advertising Model
Operations Research, Vol. 21, No. 4, pp. 998-1013, 1973
34 Pages Posted: 30 Jan 2008 Last revised: 11 May 2011
Date Written: May 1, 1972
Abstract
This paper considers an optimal-control problem for the dynamics of the Vidale-Wolfe advertising model, the optimal control being the rate of advertising expenditure to achieve a terminal market share within specified limits in a way that maximizes the present value of net profit streams over a finite horizon. First, the special polar cases of fixed and free end points are solved with and without an upper limit on advertising rate. The complete solution to the general problem is then constructed from these polar cases. The fixed-end-point case with no upper limit on the advertising rate is solved by using Green's theorem, while the other cases require additional use of switching-point analysis based on the maximum principle. The optimal control is characterized by a combination of bang-bang, impulse, and singular control, with the singular arc forming a turnpike.
Some explanatory remarks on this paper are available in: Sethi, Some Explanatory Remarks on the Optimal Control of the Vidale-Wolfe Advertising Model, Operations Research, Vol. 22, No. 5(Sep. - Oct., 1974), pp. 1119-1120.
PDF version: Sethi, S.P., "Optimal Dynamics of the Vidale-Wolfe Advertising Model, Part 1: Fixed Terminal Market Share," Technical Report No. 72-9, Department of Operations Research, Stanford University, May 1972.
Keywords: The Vidale-Wolfe Advertising Model,Optimal Control, Advertising, maximum principle, Green's theorem, singular control, dynamics
JEL Classification: C61, M31, M37, M31, M00
Suggested Citation: Suggested Citation
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