Ordering Policy And Supply Chain Coordination: Based On Cooperative Search Advertising

The Internet has seen revolutions in advertising industry,and traditional newspaper and leaflet advertisements have gradually faded out.Currently,search advertising is one of the most common forms of advertising.When enterprises implement advertising promotions,they have to consider this important form of advertising.However,since the members in supply chains usually hold a principle to maximize their own profit,they scarcely make decisions that meet the global optimal.At this time,some measures need to be taken to coordinate supply chains.Advertising cooperation is one of the supply chain coordination methods widely used in promotion activities.In order to incentivize downstream retailers to invest more in advertising,manufacturers or suppliers at the upstream of supply chains will provide retailers with certain advertising subsidies.The most common form of advertising cooperation is to design a fixed proportion of advertising subsidies.However,the unique bidding mechanism of search advertising and its own characteristics have differed search advertising cooperation from traditional advertising cooperation.This paper further discusses cooperative search advertising,considering the impact of position effect on optimal decisions,including analyzing ordering decisions and contracting simultaneously.There are two main parts: firstly,analyzing the manufacturer's optimal advertising subsidy ratio and retailer's ordering quantity in decentralized and centralized supply chain respectively,only employing search advertising cooperation contract;then,discussing whether the combined contract of wholesale price and search advertising cooperation,as well as the revenue sharing contract and search advertising cooperation combined contract,affect the retailer's ordering and advertising decisions,and whether they can achieve the performance of a centralized decision-making supply chain.In this paper,the generalized second price auction is employed to describe the search advertising auction process,and the analysis of the operating decisions of manufacturers and retailers is based on the Stackelberg game,using backstepping method.The main conclusions are: the search result of the search advertising position is determined by the bidder 's expected revenue per click;the retailer 's optimal order quantity and the manufacturer 's optimal wholesale price are not only related to the click-through rate,but also to the standard deviation of the demand function when obtaining two different advertising positions;neither search advertising cooperation,nor wholesale price contracts and search advertising cooperation used together,can make the supply chain performs as a centralized decision-making player.The combined contract of revenue sharing contract and search advertising cooperation,can help the supply chain to be totally coordinated.In the Stackelberg game,the manufacturer has the essential leadership and final decision-making power,and the optimal decision set depends on the search advertising positions' click-through rate and conversion rate,price and cost of the product,and the bidder 's expected value per click,etc.