Cordination of pricing, advertising, production and work-force level decisions in a functionally decentralized firm

Abstract

<p>An optimal control model of a marketing-production system is formulated. The Marketing subsystem in the model is represented by the Nerlove -Arrow model of advertising and the production subsystem by the HMMS model of production planning. Using the proposed model as a reference point, a decentralized procedure is designed for coordinating pricing, advertising, production and work-force level related decisions in a firm. Attention is especially devoted to the case when the demand for the product is highly seasonal. An example is presented to illustrate the procedure.</p>