Optimizing the Selling Price and Advertising Cost in a Two Layers Supply ChainIncluding a Manufacturer and Two Retailers

In this research, marketing and pricing decisions of a two-level supply chain consisting of one manufacturer and two competing retailers have been considered. Theinfluences of manufacturer participation in local advertising costs of retailers have beenstudied. Since competition in the supply chain exists, the game theories are used to solve the model. For this purpose, manufacturer acts as Stackelberg leader who specifies wholesale prices for each retailer. Demand is dependent on the price and advertising. In this study, optimal pricing and advertising costs are determined such that maximizes the total profits. Finally, numerical examples are provided.By using the results of numerical example we can conclud that the manufacturerparticipationinlocaladvertising costs of retailers is effective and increases total profits of chain.