cooperative advertising

The online marketplace offers abundant opportunities for businesses across various industries. Manufacturers are increasingly adopting online sales channels in addition to retail sales to bypass intermediaries, directly reach end users, and enhance profitability. To attract a larger customer base, manufacturers employ advertising across multiple channels, while retailers focus on local advertising within their respective regions. In this research, one of the key challenges revolves around determining pricing strategies and advertising investments for both manufacturers and retailers, while considering various constraints. The presented supply chain includes both global and local advertising, with the impact of global advertising being manifested through distinct advertising channels that are specified individually. To enhance retailer motivation, the manufacturer contributes to the cost of local advertising. To address these challenges, a bi-level model is formulated, and the concept of Variational Inequalities is employed to solve it. The experimental results are obtained and analyzed using Gams software.

Most cooperative advertising works assume that subsidy is usually given directly to the retailer. This work addresses a three-level supply chain setting where advertising subsidy is transferable from the manufacturer to the retailer through the distributor, together with a situation where both the retailer and the distributor directly engage in advertising. The parties in the channel are considered to play an infinite horizon Stackelberg differential game with the manufacturer as the leader, and the distributor and the retailer as the first and the last followers respectively. The work studies the effect of subsidy on the players’ profits in a four-channel setting where both the manufacturer and the distributor do not subsidise advertising; the manufacturer’s provided retail subsidy is not transferred to the retailer; the distributor provides retail subsidy without the manufacturer’s involvement; and the distributor transfers the manufacturer’s provided subsidy to the retailer. It determines the players’ optimal advertising efforts, subsidy policies, and profits for the four channel settings. It also obtains the players’ appropriate subsidy limits. The work shows that the channel profits are best with the distributor’s participation, followed by transfer of subsidy setting, and worst with non-provision of subsidy by both manufacturer and distributor.

During the past few decades, there have been tremendous efforts in cooperative advertising. In spite of many practical applications in real life, cooperation in advertising and pricing strategies in a one-manufacturer and multi-retailer supply chain is almost overlooked in the literature. Hence, this paper seeks to investigate optimum co-op advertising and pricing decisions in a B2B relationship for a supply chain consist of a manufacturer and numerous multiple retailers in Iran as a case study. This paper introduces a game theoretic model containing pricing and cooperative advertising in a one-manufacturer and multi-retailer structure. Non-cooperative and cooperative game structures are used for analyzing the proposed model. The non-cooperative game structure uses Stackelberg game among the echelons and Nash game in the retailer echelon. Motivated by a real case study including an Iranian supply chain data of one manufacturer and 150 retailers, a novel model proposed to tackle the similar condition occurred in real life. The results indicate that the manufacturer prefers to suggest higher participation rate to smaller retailers. Sensitivity analysis is presented, and some managerial insights are finally derived from the results.

This work considers cooperative advertising in a manufacturer–retailer supply chain. While the manufacturer is the Stackelberg leader, the retailer is the follower. Using Sethi model it models the dynamic effect of the manufacturer and retailer’s advertising efforts on sale. It uses optimal control technique and stochastic differential game theory to obtain the players’ advertising strategies and the long-run value of the awareness share. Further, it models the relationship between the payoffs of both players and the awareness share. The work shows that with the provision of subsidy the retail advertising effort increases while the manufacturer’s advertising effort reduces. It further shows that the total channel payoff is higher for subsidised retail advertising. However, the subsidy can only be possible if the rate of growth of the manufacturer’s payoff is twice higher than that of the retailer.