Estimation uncertainty and optimal advertising decisions

In this paper the authors develop a normative model that is built on an empirically relevant foundation. They observe that decision makers, among them advertisers, rely on estimated relationships in reaching resource allocation decisions, and the authors investigate the normative implications of this process. In particular, they explore the effects of uncertainty stemming from the use of sample estimates of population parameters. In general, the authors find that ignoring this estimation-related uncertainty leads to suboptimal decisions.