A GAME-THEORETIC APPROACH FOR COORDINATION OF PRICING POLICIES AND COOPERATIVE ADVERTISING CONSIDERING THE COSTS OF INVENTORY IN A TWO-LEVEL SUPPLY

Today, organizations are aware of the importance of appropriate pricing and cooperative advertising in profitability and survival of the organization. To coordinate decisions and activities of the organization, it is expected that many benets will be available to members. This article discusses the coordination of pricing policies and determines the amount of cooperative advertising considering the costs of inventory in a two level supply chain, including a manufacturer and a retailer with demand depending on pricing and cooperative advertising in which the manufacturer oers its product only in the retail channel and the retailer does the purchase only from the manufacturer. The purpose of this is, rst, to determine the wholesale price, the amount of national advertising and, the participation rate in local advertising by the manufacturer. Second, its propose is to determine the retail price and local advertising by the retailer. In this research, the ordering quantity of the retailer is the problem input. The problem has been solved by the two non-cooperative games of Nash and Stackelberg-retailer and a cooperative game in which the members work together to maximize the prot of the entire chain with several numerical examples; the acquired results for each game are compared. These results indicate that the prot of the entire chain in cooperative game is more than the two other games, and also the prot of the manufacturer and retailer in the Stackelberg-retailergameismorethatintheNashgame. The retail price is the lowest in the Stackelberg-retailer game. The results show that the amount of national and local advertising is highest in the cooperative game and the lowest in the Stackelberg-retailer game. Finally, the eect of changing the parameters of the problem have been investigated on the wholesale price and retailer price in which the eect of change in the cost of production on the wholesale price is higher than the retail price, and the eect of base demand change based on the retail price is higher than the wholesale price.