Application of optimal control theory on optimal advertising expenditure in monopoly

Abstract

Presented paper is being focused on Optimal control theory, Variation Calculus and its economic application. Aim of this research paper is to shortly describe Optimal control and Variation Calculus and to present how can we deal with these type of issues. The last part of this paper is presenting possible economic application of Optimal control, based on the maximization of profit in monopoly while introducing new product on the market. Our control variable is the advertising rate, which affects the profit of monopoly through advertising expenditures and as a state variable was the market share defined.