The Optimal Advertising-Allocation Rules For Sequentially Released Products: The Case of the Motion Picture Industry

This study investigates the optimal advertising-allocation rules for sequentially released products. The authors used both analytical and empirical approaches to derive and validate the rules using theatrical prerelease, postrelease, and DVD advertising and sales data in the movie industry. Theatrical prerelease advertising increased when there was a strong prerelease advertising effect on the opening box office or a strong carryover effect on DVDs through the opening box office. The optimal allocation percentages are proposed on the basis of the estimated parameters of the empirical analysis. A simulation study proposes likely improvements in revenues for 74 percent of the titles with optimal rules.