Optimizing Consumer Advertising Intermediary Advertising And Markup in a Vertic

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Optimizing Consumer Advertising Intermediary Advertising And Markup in a Vertic
Philippe Naert
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Then when producers set k, k, , and c' equal * * * to k_, k, , and c' respectively, the number of intermediaries when excess * profit is zero will equal w, .
6. Numerical Example In this section an example illustrating the sales maximization and profit maximization models developed in section (5) is studied. Fiacco and McCormick's SUMT program was used to solve the problems [10], Let ra = 10 n = 10 p = 10 ^1 = 5 t = 10 k = 2 k^=l k2 = l r = . 10 F^= 200 d = 2 e = .
e^= . 5 Q = 100 g = . 5 Sales
... per link in the M - N type VMS is then a = Q/ran = 1 Cost of communication is kmn = 2 x 10 x 10 = 200 ' Cost of communication is also c-Q, so that cost of communication per unit is c- = kmn/Q = 200/100 = 2 - 20 - And profit for producers, tt, if they sell directly to consumers is ■jj = Q(p _ c^ _ C2) = 100(10 - 5 - 2) = 300 Now let us examine what would happen if an intermediary level, W, exists. The sales maximization problem as stated in (19) reduces to max 150W / (1 + . 5w) + 10 In Lsk^w/d + .

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