Cooperative Advertising In A Competitive Supply Chain With Network Externalities

In the high-tech industries where the products have network externalities,manufacturers are usually supply chain leaders because of patents,technologiesand funds.This thesis studies a secondary supply chainconsisting of a single manufacturer and two competitive retailers.The manufacturer produces a product but owns two brands,and each retailer sells one of the brands separately.In the fierce market competition,the retailers invest local advertising for product promotion.The manufacturer improves product qualityand chooses whether to share the local advertising or not.In order to win support from the manufacturer,the two retailers can buildan alliance or not.One of the retailers aims at maximizing its own profits without an alliance,while it aims at maximizing the allianceprofits with an alliance.This thesis usesgame theory method to study the coordination problem between a manufacturer and two retailers.We analyze the influence of network externalities and retailer competition effects on advertising decisions and quality R&D decisions in a supply chain.The conclusion of the thesis provides a theoretical reference for strategic decision-making.Firstly,we establish a centralized model as the best benchmark,and then we establish four decentralized models according to whether the manufacturer supports local advertising and whether the two retailers buildan alliance.Our result shows that supply chain members have different decision-making preferencesunder different cooperation methods.The profits of all parties under the cooperative advertising game is always better than the non-cooperative advertising game.Two-retailer alliance benefitsthe retailers profits but hurts the manufacturer profits and system profits.A centralized supply chain maximizes system benefits and increases technology R&D,but it does not always capture the largest market demand.Finally,we have a numerical analysis of the above results and summarize the outlook.