, K. N. Toosi University of Technology
Industrial Engineering, K.N. Toosi University of Technology
Abstract Vertical cooperative (co-op) advertising is typically a cost sharing mechanism and coordinated effort by the channel’s members in order to increase demand and overall profits. In this marketing strategy, the manufacturer shares a fraction of the retailer’s advertising investment. This paper studies the advertising and pricing decisions in a retailer-manufacturer supply chain in which the market demand is simultaneously affected by retail price and members’ advertising efforts. We establish three non-cooperative game-theoretic models and one cooperative model. A particular non-cooperative game can be played based on the channel type which can be retailer-dominant, manufacturer-dominant, or the same-power. We investigate feasibility of the cooperative game with the aim of channel coordination, and, utilize bargaining model in order to discuss how the both member should split the extra profit obtained by moving to cooperation case.