3. The director of advertising for a retail chain is considering how to allocate her $200,000 budget for television advertising among four programs (A, B, C, D) on three channels (1, 2, 3). Market research studies have shown that the chain's cus- tomers can be broken down into two groups: "High-end Achievers" and "Aspiring Achievers." High-end Achievers spend twice as much in the store as do Aspiring Achievers. The director wants to maximize the total in-store spending potential of the audience but must have at least three ads on each program, and cannot spend more than 50% of the budget on any one channel. The audience by pro- gram and the ad costs are: 1. Expected % High-End % Aspiring Channel Program Audience Achievers Achievers Cost/Ad 1 A 100,000 25 75 $7,500 1 B 50,000 60 40 $4,000 2 C 90,000 40 60 $6,500 3 D 80,000 50 50 $5,000 What is the most effective ad purchase ignoring the fact that the number of ads on any one program must be integer? 2. Include an integer constraint on the number of ads and re-solve. 3. Compare the two solutions.

3. The director of advertising for a retail chain is considering how to allocate her $200,000 budget for television advertising among four programs (A, B, C, D) on three channels (1, 2, 3). Market research studies have shown that the chain's cus- tomers can be broken down into two groups: "High-end Achievers" and "Aspiring Achievers." High-end Achievers spend twice as much in the store as do Aspiring Achievers. The director wants to maximize the total in-store spending potential of the audience but must have at least three ads on each program, and cannot spend more than 50% of the budget on any one channel. The audience by pro- gram and the ad costs are: 1. Expected % High-End % Aspiring Channel Program Audience Achievers Achievers Cost/Ad 1 A 100,000 25 75 $7,500 1 B 50,000 60 40 $4,000 2 C 90,000 40 60 $6,500 3 D 80,000 50 50 $5,000 What is the most effective ad purchase ignoring the fact that the number of ads on any one program must be integer? 2. Include an integer constraint on the number of ads and re-solve. 3. Compare the two solutions.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter14: Monopolistic Competition And Product Differentiation

Section: Chapter Questions

Problem 15P

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