A dynamic optimal advertising model for new products

Many dynamic optimal control models for advertising make efforts to solve the problem of determining optimal advertising expenditures and other variables of interest over time for a firm or several competing firms. However, by analyzing the extant literature, one finds that few dynamic optimal advertising models available consider the problem within the product diffusion framework. Furthermore, the established models involving product diffusion are inspired by the Bass model, which is out of date. This paper poses a dynamic optimal advertising model for new products which considers the product diffusion based on the relative newly developed generalized version of the Bass model. In this paper, the optimal control model is used to derive the optimal advertising expenditure policy, which has implications for advertising practice.