AN OPTIMAL DYNAMIC ADVERTISING MODEL WITH INVERSE INVENTORY SENSITIVE DEMAND EFFECT FOR DETERIORATING ITEMS

This paper proposes a dynamic advertising model for deteriorating items, and the demand is influenced by goodwill and inventory level. The goodwill affected by advertising effort has a positive effect on demand while the inventory level has a negative effect on demand, which is named as inverse inve...

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Bibliographic Details
Published in:Journal of systems science and systems engineering 2017-10, Vol.26 (5), p.593-608
Main Authors: Xu, Minghui, Zuo, Xiaode
Format: Article
Language:English
Subjects:
Advertising
Complexity
Consumers
Economic Theory/Quantitative Economics/Mathematical Methods
Engineering
Fruits
Inventory
Inventory management
Marketing
Maximum principle
Operations management
Operations Research/Decision Theory
Retail stores
优化问题
变质
广告模型
库存
敏感
数值研究
易腐物品
最大值原理
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Summary:This paper proposes a dynamic advertising model for deteriorating items, and the demand is influenced by goodwill and inventory level. The goodwill affected by advertising effort has a positive effect on demand while the inventory level has a negative effect on demand, which is named as inverse inventory sensitive demand effect. We assume that the deteriorating rate could be influenced by the inventory level and we determine the deteriorating rate formulation based on this assumption. The optimal advertising effort and inventory level are obtained by solving the optimization problem based on Pontryagin＇s maximum principle. Furthermore, numerical studies are provided and some managerial insights are presented.
ISSN:1004-3756
1861-9576
DOI:10.1007/s11518-016-5316-2