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In the Dorfman-Steiner model of advertising, what isthe profit-maximizing adversing to sales ratio for a firm equal to? Is it higher for oligopolistsor monopolists?Now suppose
In the Dorfman-Steiner model of advertising, what isthe profit-maximizing adversing to sales ratio for a firm equal to? Is it higher for oligopolistsor monopolists?Now suppose the elasticity of demand for hotels is 1.9 and the advertising-to-sales ratio for Hilton is 0.097.
a. Following Dorfman and Steiner, if we assume that Hilton is profit-maximizing, what does Hilton's behavior imply about the value of its advertising elasticity of demand?
b. Interpret the value of Hilton's advertising elasticity of demand calculated in part (a)
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