When Does Lag Structure Really Matter in Optimizing Advertising Expenditures?

A paper by Bultez and Naert in the May 1979 issue of Management Science tentatively concludes that profits are relatively insensitive to misspecification of the lag structure of advertising. We examine the conditions under which a firm's profits are most likely to be sensitive to the misspecification of the lag structure. Our analysis indicates how this sensitivity is related to (a) the form of the true lag structure, (b) the demand function, (c) the cost function, and (d) the firm's discount rate.