Game Models Of Cooperative Advertising In A Manufacturer-Retailer Supply Chain

Cooperative advertising in a supply chain, i.e., the manufacturer reimburses a retailer for promoting the manufacturer's products, has become a mainstay of marketing practice, and it also has become an indispensable cooperation mechanism of product distribution in recent years. Based on the survey of the current researches on co-op advertising, this paper mainly employs a game theory approach and the methodology of differential games to thoroughly study the co-op advertising program within the two-echelon supply chain, composed of a single manufacturer and an exclusive retailer, in the static context and the dynamic setting.Firstly, this paper systematically expounds the advances in research of co-op advertising theory from the static context, the dynamic setting, the competitive case and empirical analyses at home and abroad. Then, we sum up and evaluate these existing researches in detail.Secondly, this paper quickly turns its attention to the problem of co-op advertising and product pricing. We respectively investigate the manufacturer's and the retailer's optimal advertising strategies, pricing policies, expected profits and the system profits in the classic Stackelberg leader-follower game, in which the manufacturer acts as a leader whereas the retailer is a follower, and a Nash cooperative game. Comparing the equilibrium outcomes in two game situations, we find that, for the manufacturer, the retailer, the supply chain system and even consumers, the Nash cooperative game structure is strictly optimal than the leader-follower game structure.Thirdly, this paper relaxes the previous assumption that the market demand is certain. We specially discuss the problem of co-op advertising, ordering and stocking when a random factor satisfies uniform distribution and exponential distribution. Based on the extensive researches on the conventional newsboy model, We individually explore the manufacturer's and the retailer's optimal action strategies, both expected profits and the entire system expected profits in the Stackelberg leader-follower game and the Nash cooperative game. The results show that, ordering quantities, the stocking level, the national or local advertising rate, the respective expected profits of channel members, and the system expected profits at Nash co-op equilibrium are higher than those at Stackelberg equilibrium.Finally, this paper intends to transfer the researches on co-op advertising model from the static setting to a dynamic framework. We fully consider both short and long term impacts of the manufacturer's national advertising and retailer's local advertising on the products'sales volume. And we respectively obtain the closed-form solutions of the manufacturer's and the retailer's optimal feedback strategies, and the relevant system's optimal profits within three different game structures which are the Nash non-cooperative game, the Stackelberg leader-follower game, and the Nash cooperative game. By comparatively analyzing, We find that the manufacturer's advertising expenditures, the retailer's advertising expenses, the profits for both parties and the system profits at Nash non-cooperative equilibrium are lower than those at Stackelberg equilibrium, when the negative effect of the retailer promotional effort on brand goodwill is sufficiently small. Furthermore, if the allocation scheme of the system profits gain is feasible Pareto efficient, the Nash cooperative game structure is strongly optimal than above-named non-cooperative game structures, for channel members and the overall channel. Moreover, a Nash bargaining model is utilized to reasonably allocate the system profits gain at Nash cooperative equilibrium.