PRICING AND ADVERTISING DECISIONS COORDINATION USING GAME THEORY

In the recent years, several researches have dealt with vertical cooperative advertising in a manufacturerretailer supply chain which is named cooperative advertising. This type of collaboration can be dened as a nancial agreement between the members of the chain, under which the producer suggests to the retailer to bear either a certain part or all of advertising costs of the retailer. The researches in cooperative advertising topic are divided into two main topics. The researches belonging to the rst section are focused solely on advertising. But, the second group is those who not only have focused on advertising, but also have included other decision variables, such as pricing. Producers can decrease the advertising cost of their retailers by paying o a fraction of those costs within the framework of a vertical cooperative advertising plan. Cooperative advertising is a coordinated eort by all members in a distribution channel to increase the overall prots under increasing customer demand. In each distribution channel, the upstream member can be a producer promoting its product via the national level advertising to enhance its brand equity. On the other hand, down-stream members, who can be retailers, can increase the demands under local advertising. So, cooperation in advertisement is an economic way to achieve marketing goals through which manufacturers can reduce the retailers' advertising costs by paying a fraction of that. In this research, pricing and advertising decisions in a supply chain, including single manufacturer and single retailer, are simultaneously studied. Using game theory, four dierent strategies between members are considered. Firstly, three noncooperative games with symmetric power in Nash and with asymmetric power in Stackelberg games, in which each member can be a leader and the other one is a follower, are investigated. Then, a cooperative game where each member intends to maximize his prot is studied. The concavity of each prot function is proved, and for each case, numerical example and sensitivity analysis are performed.