Resumen
Demand for an innovative product typically followsa diffusion process. Prior advertising research on the innovativenew product assumes an infinite capacity and a deterministicdemand situation. However, capacity constraints are common forthe new products. Also, the demand for the new product isextremely difficult to predict before its launch. Nonetheless, afirm that deals with the new product mostly has to take initialadvertising and production planning decisions under anuncertain demand and capacity constrained situation. Afterobserving the initial demand, the firm generally adjusts itsmarketing and production plans as per the demand realized. Inthis paper, we suggest the use of a two stage stochasticprogramming with recourse to analyze this situation. Our resultsshow how the operational characteristics such as inventoryholding and back order costs can significantly influence theadvertising under different diffusion patterns.