Optimal Advertising When Envisioning a Product-Harm Crisis

@article{Rubel2011OptimalAW,
  title={Optimal Advertising When Envisioning a Product-Harm Crisis},
  author={Olivier Rubel and Prasad A. Naik and Shuba Srinivasan},
  journal={Marketing Science},
  year={2011},
  volume={30},
  pages={1048-1065}
}
How should forward-looking managers plan advertising if they envision a productharm crisis in the future? To address this question, we propose a dynamic model of brand advertising in which, at each instant, a non-zero probability exists for the occurrence of a crisis event, which damages the brand’s baseline sales when the crisis occurs. Because managers don’t know when the crisis will occur, its random time of occurrence induces a stochastic control problem, which we solve analytically. More… CONTINUE READING
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