Collaborative Advertising in the Supply Chain Considering the Advertising Company Under Different Advertising Methods

Advertising nowadays plays an important role in marketing and service and product recognition, whereas there are many studies on supply chain and collaborative advertising. However, In the previous researches the advertising company was considered as an off-chain member that provided advertising goods and services to attract customers based on the order of the retailer or manufacturer. On the other hand, in the reality, manufacturers and retailers often face budget constraints to finance advertising, which limits their advertising activities. Therefore, in this study, for the first time an advertising company is analyzed as a new member in a two-tier supply chain, given the financial weakness of manufacturers and retailers in providing adequate funding for advertising, as well as the interest of advertising companies in sharing the profits of the chain instead of receiving advertising costs. For this purpose, the issue of partnership of advertising company with two-tier supply chain including manufacturer and retailer is raised. In this regard, instead of paying the all advertising costs to the advertising company, the manufacturer and retailer pay part of the costs and the rest is compensated by paying a percentage of their sales profit. This problem was modeled using the game theory approach and the optimal decisions of the chain members regarding pricing at the wholesale and retail levels, as well as the amount of participatory advertising at the three levels of wide or above the line, below the line and through the line were determined.