Efficient resource management and pricing in a two-echelon supply chain with cooperative advertising: A bi-level programming approach

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.