Game Analysis of Vertical Cooperative Advertising with Price Discount

This paper studies the problem of cooperative advertising of two-echelon supply chain when the manufacturer offers a price deduction to consumers. And the equilibrium outcomes in a two-stage game and a coordinated co-op game are discussed and compared respectively. The results demonstrate that, under a certain condition, the retailer will increase local advertising effort if the manufacturer offers more price discount to customers directly. For any given price discount, the total profit for the supply chain with cooperative scheme is always higher than that with the non-cooperative scheme, and we find that the price discount will only be suitable for the merchandise with price sensitive demand. Then the Nash bargaining model is utilized to determine the allocation of the entire system profit gain. Finally, a numerical example is given to confirm the above conclusion.

Project Supported:

Clc Number:

F224.32