Dynamic generic and brand advertising decisions under supply disruption

Abstract

Enterprise captures market share from competitors through brand advertising and increases consumer demand for this category of products through general advertising. In this paper, considering a supply chain with a manufacturer who is responsible for generic advertising and a retailer who undertakes brand advertising, a Stackelberg differential game-theoretic model is established to examine the impact of supply disruption faced by the manufacturer on the optimal decision-making and profits of supply chain members. When the supply of raw materials is disrupted, the optimal advertising strategies and advertising subsidy scheme designed for the initially estimated product sales need to be revised. The key to solving this problem is to explicitly consider possible deviation profit margins of supply chain members and total market demand for products caused by changes in the original product supply. Considering that the deviations of the profit margins and the total market demand are arbitrary, we analytically derive several propositions and obtain the optimal advertising strategies and the advertising subsidy scheme before and after the supply disruption. Then, we explore the impact of supply disruption through numerical analysis and provide management insights that are helpful for managers to re-design the advertising strategies and advertising subsidy schemes under supply disruption.

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