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I am trying to maximize expected revenue over a horizon.

Consider the following function:

\begin{align} sales(budget_1, budget_2) = \sum_te^{C_1t} * budget_1t^{saturation_1t} + e^{C_2t} * budget_2t^{saturation_2t} \\ \end{align}

where $t$ denotes the timestep and $0 \le (saturation_1t, saturation_2t) \le 1$ thus exhibiting diminishing marginal returns and $C_1t, C_2t$ acts as our exponents for the coefficients.

Now consider a budget ceiling of $B$.

My aim is to reach a target ROI (return on investment) while maximizing the budget, thus giving a target $T$:

\begin{align} \max_{budget_1, budget_2} \sum_tbudget_1t + budget_2t \end{align}

subject to the constraints:
\begin{align} \frac{\sum_te^{C_1} * budget_1^{saturation_1} + e^{C_2} * budget_2^{saturation_2}}{\sum_tbudget_1t + budget_2t} & \ge T \\\\ \sum_tbudget_1t + budget_2t & \le B \end{align} Is this a bad way of formulating it and if so/not so what would be an appropriate solver for such a problem?

I assume that the constraint may introduce some concavity.

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  • $\begingroup$ Is t a subscript i.e should budget_1t be budget_{1,t}? Have you forgotten budget_{1,t}>=0? What is variables and what is constants? Is it supposed to be a convex problem? $\endgroup$
    – ErlingMOSEK
    Commented Jan 11, 2023 at 18:49
  • $\begingroup$ If the problem is convex you can formulate it as a conic optimization problem see docs.mosek.com/modeling-cookbook/index.html. These problems can be solved with mosek.com. You can also use cvxpy.org. $\endgroup$
    – ErlingMOSEK
    Commented Jan 11, 2023 at 18:52

1 Answer 1

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Assuming C1,C2 are constants, just rearrange your first constraint as

$\sum_t(e^{C_1} * budget_1^{saturation_1} + e^{C_2} * budget_2^{saturation_2}) \ge T\sum_t t(budget_1 + budget_2)$\

Appropriate solver will be Gurobi, CPLEX to name a few. You can import them on Google Colab or use NEOS

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