We develop a dynamic control model of a monopolist composed of two profit centers, e.g., an operations department in charge of the product innovation and a marketing department controlling advertising effort as well as the retail price. Meanwhile, knowledge accumulating in product innovation and advertising effort which lead to reducing the corresponding investment cost is considered. The customer inverse demand function depends jointly on the quality level as well as the product goodwill which can be improved by product innovation and advertising efforts. Our results show that the learning ra...
