The Dorfman-Steiner theorem, in neoclassical economics, characterizes the profit maximizing level of advertising expenditure a firm should undertake, showing that the optimal advertising to sales ratio depends on the price elasticity of demand and the elasticity of sales with respect to advertising. It is named for the economists Robert Dorfman and Peter O. Steiner, who developed the result in a widely cited 1954 article in the American Economic Review.
Facts
StatementThe optimal level of advertising for a firm is found where the ratio of advertising to sales equals the price-cost margin times the advertising elasticity of demand. 2 Classification
Statement Form Connections
Sources
1. Wikipedia: Dorfman-Steiner theorem
WikipediaLead section, statement-form referenceQuote, Lead section, statement-form reference
The optimal level of advertising for a firm is found where the ratio of advertising to sales equals the price-cost margin times the advertising elasticity of demand.
2. Dorfman-Steiner theorem - Wikipedia
Introduction
The optimal level of advertising for a firm is found where the ratio of advertising to sales equals the price-cost margin times the advertising elasticity of demand.
History section
who developed the approach in their widely cited 1954 article in the American Economic Review
In Group: Economic Theory, Lead paragraph
The Dorfman-Steiner theorem (or Dorfman-Steiner condition) is a neoclassical economics theorem which looks for the optimal level of advertising that a firm should undertake.
View the SourceReader Challenges (0)
No disputes yet. Spotted an error or a better source? Open the first one.
Sign in to dispute this or suggest a correction.