Coordination of cooperative promotion efforts with competing retailers in a manufacturer-retailer supply chain

Abstract

In this paper, the issue of cooperative (co-op) promotion efforts is addressed in a two-stage supply chain (SC).The investigated SC includes one monopolistic manufacturer and two duopolistic retailers facing different market demands.The customers' demand is affected by both advertising efforts of the manufacturer and two retailers.Moreover, the retailers compete with each other on local advertising investments within the market.In order to boost the retailers' advertising level, it is assumed that the manufacturer pays a ratio of the retailers' advertising expenditures.We propose four non-cooperative game scenarios and one cooperative game.Non-cooperative models are established through both Stackelberg and Nash game between two echelons.Moreover, both Cournot and Collusion behaviors are assumed to be followed by two retailers.We develop a promotion cost sharing contract to achieve the channel coordination.Under cooperation model, all SC members seek to reach the highest profit for the entire SC by considering the bargaining power of the SC participants.In each game scenario the optimal solution and unique equilibrium are determined.In addition, a comparison on the advertising level of all SC members along with the value of participation rate are provided.In addition, the feasibility of the cooperative game is discussed and resulted.

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