Co-op advertising models in manufacturer–retailer supply chains: A game theory approach

In the literature of cooperative (co-op) advertising, the focus of research is on a relationship in which a manufacturer is the leader and retailers are followers. This relationship implies the dominance of the manufacturer over retailers. Recent market structure reviews have shown a shift of retailing power from manufacturers to retailers. Retailers have equal or even greater power than a manufacturer when it comes to retailing. Based on this new market phenomenon, we intend to explore the role of vertical co-op advertising efficiency with respect to transactions between a manufacturer and a retailer through brand name investments, local advertising expenditures, and sharing rules of advertising expenses. Three co-op advertising models are discussed which are based on two noncooperative games and one cooperative game. In a leader–follower noncooperative game, the manufacturer is assumed to be a leader who first specifies the brand name investment and the co-op subsidization policy. The retailer, as a follower, then decides on the local advertising level. In a noncooperative simultaneous move game, the manufacturer and the retailer are assumed to act simultaneously and independently. In a cooperative game, the system profit is maximized for every Pareto efficient co-op advertising scheme, but not for any other schemes. All Pareto efficient co-op advertising schemes are associated with a single local advertising level and a single brand name investment level, but with variable sharing policies of advertising expenses. The best Pareto efficient advertising scheme is obtained taking members' risk attitudes into account. Utilizing the Nash bargaining model, we discuss two situations that (a) both members are risk averse, and (b) both members are risk neutral. Our results are consistent with the bargaining literature.     

A Game-Theoretic Analysis for Coordinating Cooperative Advertising in a Supply Chain

In this paper, we investigate the coordination of cooperative advertising decisions in a supply chain with one manufacturer and one retailer. The manufacturer and the retailer invest in national and local advertising, respectively. The manufacturer also agrees to share part of the total local-advertising costs with the retailer. The model is analyzed using game theory. We also compare the results of our analysis with similar results from the literature developed for cooperative advertising.     

Pricing and advertisement in a manufacturer–retailer supply chain

We use a game theoretical approach to study pricing and advertisement decisions in a manufacturer–retailer supply chain when price discounts are offered by both the manufacturer and retailer. When the manufacturer is the leader of the game, we obtained Stackelberg equilibrium with manufacturer’s local allowance, national brand name investment, manufacturer’s preferred price discount, retailer’s price discount, and local advertising expense. For the special case of two-stage equilibrium when the manufacturer’s price discount is exogenous, we found that the retailer is willing to increase local advertising expense if the manufacturer increases local advertising allowance and provides deeper price discount, or if the manufacturer decreases its brand name investment. When both the manufacturer and retailer have power, Nash equilibrium in a competition game is obtained. The comparison between the Nash equilibrium and Stackelberg equilibrium shows that the manufacturer always prefers Stackelberg equilibrium, but there is no definitive conclusion for the retailer. The bargaining power can be used to determine the profit sharing between the manufacturer and the retailer. Once the profit sharing is determined, we suggest a simple contract to help the manufacturer and retailer obtain their desired profit sharing.     

风险中性零售商的合作广告策略与订货模型

考虑了由一个制造商与一个零售商构成的单期二阶段供应链是否进行合作广告的博弈问题.面对市场需求的不确定性,零售商从制造商处订购报童类型产品销售给消费者,零售商具有风险中性的行为特征.通过不合作广告与合作广告两种情形,制造商与零售商进Stackelberg主从博弈,得到了均衡解,比较后发现,合作广告下的最优解及利润总是优于不合作广告下的最优解和利润,告诉了上下游企业采用合作广告的广告策略.最后,通过数值算例,给出了需求敏感系数对最优决策的影响,同时也论证了有关结论.     

Coordination of cooperative advertising in a two-level supply chain when manufacturer offers discount

We studied the coordination of cooperative advertisement in a manufacturer–retailer supply chain when the manufacturer offers price deductions to customers. With a price sensitive market, the expected demand with cooperative advertising and price deduction is demonstrated. When the manufacturer is a leader, we obtained the optimal national brand name investment, local advertisement and associated manufacturer’s allowance with any given price deduction. When the manufacturer offers more price deduction to customers, the retailer will increase local advertisement if the manufacturer provides the same portion of the local advertising allowance. We obtained the necessary and sufficient condition for the price deduction to ensure an increase of manufacturer’s profit, and a search procedure for determining such an optimal price deduction is provided as well. When the manufacturer and retailer are partners, we obtained the optimal national brand name investment and local advertisement. For any given price deduction, the total profit for the supply chain with cooperative scheme is always higher than that with the non-cooperative scheme. When price elasticity of demand is larger than one, the resulting closed form optimal price deduction with partnership is also obtained. To increase profits for both parties in a supply chain, we recommend that coordination in local and national cooperative advertising with a partnership relationship between manufacturer and retailer is the best solution. The bargaining results show how to share the profit gain between the manufacturer and the retailer, and determine the associated pricing and advertising policies for both parties.     

Supply chain coordination through integration of innovation effort and advertising support

This study integrates firms’ innovation and advertising decisions in a two-echelon supply chain, where a monopoly manufacturer sells products to ultimate consumers through an autonomous retailer. Considering that both innovation and advertising contribute to the product demand, we first investigate the optimal equilibriums of channel members under two different game structures: the non-cooperative and cooperative. In the non-cooperative structure, the manufacturer controls the innovation effort and wholesale price while the retailer controls the advertising rate and retail pricing. In the cooperative structure, the manufacturer agrees to share part of retailer’s advertising expenditure. We find that both the optimal operation and marketing decisions are sensitive to effects of innovation and advertising on demand as well as the manufacturer’s cost reduction coefficient due to innovation. Further, we find that the manufacturer always prefers cooperation. Meanwhile, only when the firms’ investments significantly contribute to the market mechanism, does the retailer have incentive to implement a cooperative program. In addition, we further propose a new two-way subsidy policy to coordinate channel members’ business functions.     

Cooperative advertising in a distribution channel with fairness concerns

Cooperative (co-op) advertising has been widely used in practice and employed as a strategy to improve the performance of a distribution channel. It is known from the existing models that co-op advertising could not achieve the channel coordination (i.e., maximize the total channel profit). In this paper, we consider a distribution channel consisting of a single manufacturer and a single retailer, and investigate the effect of the retailer’s fairness concerns. Applying the equilibrium analysis, we obtain the following results: (1) Channel coordination can be achieved if the retailer has fairness concerns and model parameters satisfy certain conditions. (2) Although both channel members become better off with co-op advertising if neither channel member has fairness concerns, we find situations where co-op advertising brings detrimental effects to the retailer if the retailer has fairness concerns. (3) The retailer’s fairness concerns may increase or decrease the equilibrium participation rate, the equilibrium advertising effort, and the equilibrium profit of the manufacturer and the whole channel. (4) We identify the conditions under which the effectiveness of co-op advertising can be improved or reduced by the retailer’s fairness concerns. As long as co-op advertising can bring extra profit to the manufacturer, the retailer’s fairness concerns could improve the effectiveness of the co-op advertising. (5) There exists a Pareto improvement for the profits of both the manufacturer and the retailer when a retailer without fairness concerns becomes fair-minded.     

广告分担、价格折扣与供应链的纵向合作广告

研究了生产商和零售商的纵向合作广告问题。分别在广告分担和价格折扣策略下，探讨了双方的均衡结果和利润。当生产商的边际利润较小时，生产商的最优决策是不采取任何一种策略。当生产商的边际利润达到一定范围时，广告分担策略是双方共同的最优选择。而无论在什么样的条件内，价格折扣策略都不会使双方同时满意。为了增加双方的收益，供应链成员应该在广告上集成决策。最后给出了系统集成的可行最优解的范围和Nash讨价还价解。     

Channel Coordination with Cooperative Advertising Considering Effect of Advertising on Willingness to Pay

In this paper, cooperative advertising in a manufacturer–retailer supply chain is studied. Advertising can enhance willingness to pay (WTP) of customers. This trade-off between the benefits of increasing WTP of customers and the advertising expenditure is a key to understanding the retailers optimal advertising decision. On the other hand, it is interesting to understand in which condition supporting the retailer for his advertising expenditure is beneficial for the manufacturer. In this study, in order to capture pricing and advertising strategies of the channel member, three non-cooperative games including Nash, Stackelberg retailer and Stackelberg manufacturer game-theoretic models are established. In spite of the related studies which restrict price in order to prevent negative demand, the proposed model allows channel members to increase their prices by enhancing WTP of customers. In this study, contrary to similar additive form demand functions applied in the co-op ad literature which limits their studies for cases that profit function is concave with respect to variables, optimal prices and advertising strategies are obtained for all the solution space. Surprisingly for the very high values of the advertising effect coefficient, a finite optimal advertising expenditure is achieved.     

供应链互补产品广告投入和捆绑销售联合决策研究

以一个制造商和一个零售商的供应链为研究对象,制造商生产两种互补产品,零售商可选择分开或捆绑两种销售策略。考虑互补品的负交叉弹性和广告外部性的特点,构建基于溢出效应的需求模型,运用博弈论的方法,求解零售商采取分开和捆绑两种销售策略时的均衡结果。通过比较不同销售策略下的均衡结果及利润关系,探讨在分散式和集中式两种情况下,零售商的最优广告投入和捆绑销售的联合决策问题。最后,通过数值算例,讨论产品互补程度和广告成本系数对决策结果的影响。研究结果表明,无论是在分散式还是集中式决策下,当产品互补程度较高或广告成本系数低时,分开销售是占优策略而广告费用较高;当产品互补程度较低且广告成本系数高时,捆绑销售是占优策略且广告费用较低。     

基于电商平台的供应链广告决策和分销模式研究

本文建立包含一个制造商和一个电商平台的序贯博弈模型,讨论分销模式对供应链成员广告决策和收益的影响。电商平台中存在两种分销模式:批发模式下制造商将产品卖给平台,平台再进行零售;平台模式下制造商通过平台直接销售产品。另外,制造商和平台都可以选择是否参与广告活动并决定各自的广告投入。研究发现:两种分销模式下供应链成员都应参与广告活动;与批发模式相比,平台模式下制造商广告投入增加而平台广告投入降低。平台佣金率增加一定减小制造商的收益,但只有当制造商的广告效果或平台佣金率较小时,才会增加平台的收益。两种分销模式下供应链的总收益都低于纵向整合供应链的总收益;当平台佣金率适中时,制造商选择平台模式可以实现帕累托改进。     

Vendor Management Inventory with consignment contracts and the benefits of cooperative advertising

Most of the cooperative advertising literature has focused on studying the effects of such programs considering marketing variables. This paper integrates production and inventory management with pricing and advertising considerations to assess the effects of cooperative advertising programs in bilateral monopolies. We consider a supply chain where a Vendor Managed Inventory (VMI) along with a consignment contract is implemented to coordinate the chain. We develop and solve a differential model for two games. The first one is a benchmark scenario where no cooperative advertising is offered, while the manufacturer offers the cooperative program in the second game. The main results show that cooperative advertising programs, usually considered as successful marketing initiatives, can be very difficult to implement in a supply chain undertaking a VMI policy with a consignment contract, in which operations and marketing interface is taken into account. A cooperative program mainly hurts the manufacturer’s profits, and can be profit-Pareto-improving only in a few cases. Although the retailer is generally willing to receive a support from the manufacturer, she can opt for a non-cooperative program when the largest part of the supply chain profits goes to the manufacturer. We developed several special cases to strengthen our findings.     

Vertical cooperative advertising and pricing decisions in a manufacturer–retailer supply chain: A game-theoretic approach

Manufacturers can increase the advertising expenditures of their retailers by bearing a fraction of the occurring costs within the framework of a vertical cooperative advertising program. We expand the existing research which deals with advertising and pricing decisions in a manufacturer–retailer supply chain contemporaneously. By means of game theory, four different relationships between the channel members are considered: Firstly, three non-cooperative games with either symmetrical distribution of power or asymmetrical distribution with one player being the leader in each case, and one cooperative game where both players tend to maximize the total profit. The latter is complemented by a bargaining model, which proposes a fair split of profit on the basis of the players’ risk attitude and bargaining power. Our main findings are as follows: (a) In contrast to previous analyses, we do not limit the ratio between manufacturer’s and retailer’s margin, which provides more general insights into the effects of the underlying distribution of power within the channel. (b) The highest total profit is gained when both players cooperate. This behavior puts also the customers in a better position, as it produces the lowest retail price as well as the highest advertising expenditures compared to the other configurations.     

考虑互惠偏好的闭环供应链系统合作机制研究

将互惠偏好引入到闭环供应链系统合作机制中,研究了由一个制造商,一个零售商和一个再制造商组成的三层闭环供应链,运用Stackelberg博弈理论分析了闭环供应链整体及各成员的最优决策问题,并对5种情形(决策模式)下的均衡结果进行比较分析.研究发现在考虑互惠偏好行为下,分散决策模式和局部联盟决策模式下的系统利润低于集中决策模式下的收益;新产品和再制造产品的销售量(零售价格)与制造商对零售商的互惠偏好系数呈正(负)相关,与零售商对制造商的互惠偏好系数呈负(正)相关;5种决策模式的供应链系统利润与制造商对零售商的互惠偏好系数呈正相关,与零售商对制造商的互惠偏好系数呈负相关.     

考虑延迟现象的质量改进投入和营销努力动态协同策略

利用时滞微分方程刻画质量改进投入对品牌商誉提升的延迟现象,分别构建了制造商和零售商采取非合作博弈、合作博弈以及成本分担的部分合作博弈(制造商参与营销的单向部分合作博弈、零售商参与生产的单向部分合作博弈、制造商参与营销及零售商参与生产的双向部分合作博弈)五种决策模式下的微分博弈模型。借助哈密尔顿极大值原理,求解得到五种情形下的制造商最优质量改进投入策略和零售商的最优营销努力策略以及供应链利润。对比五种博弈模式下的结果发现:1)延时现象会降低制造商进行质量改进投入的积极性,但对零售商营销努力无影响;品牌商誉在延迟现象影响下出现先衰减后提升的演进规律;2)合作博弈对于供应链绩效总是最优的,三种成本分担的部分合作博弈契约虽不能实现供应链的完全协调,但可以对非合作博弈情形进行帕累托改进;3)对比两种单向部分合作博弈,在提高供应链利润方面,制造商参与营销的成本分担契约优于零售商参与生产的成本分担契约;4)三种成本分担契约中,双向合作的部分合作博弈是供应链的最优选择,但随着延迟时间增大,其帕累托改进效果将不再明显。     

Advertising coordination games of a manufacturer and a retailer while introducing a new product

Two kinds of vertical cooperative advertising program are considered in a distribution channel constituted by a manufacturer and a retailer, where the manufacturer pays part of the retailer’s advertising costs. In the first participation scheme, the manufacturer chooses his/her advertising participation rate in the retailer’s advertising effort and then each player determines the advertising effort that maximizes his/her profit. In the second scheme, the retailer chooses the manufacturer’s participation rate and then the manufacturer determines the advertising efforts of both players with the objective of maximizing the manufacturer’s profit. Each participation scheme corresponds to a special Stackelberg game: the manufacturer is the leader of the first, while the retailer is the leader of the second. The Stackelberg equilibrium advertising efforts and participation rate in both games are provided. Then the equilibrium strategies of the two players in the analyzed scenarios are compared with the Nash equilibrium in the competitive framework. Finally, the conditions which suggest a special kind of agreement to a player are analyzed. This work was supported by the Italian Ministry of University and Research and the University of Padua.     

回收再制造与定价决策模型及供应链协调分析

假定负责废旧产品回收再制造的生产商为主导者.针对单生产商和单零售商组成的逆向供应链,分析了Stackelberg博弈(分散式控制)下和合作(集中式控制)下的零售价和回收再制造率决策,发现集中式供应链的利润较高,给出了协调供应链的利润共享合同.针对单生产商和n个竞争零售商组成的供应链,分析了一主多从Stackelberg博弈和联合决策,结果表明供应链合作可降低产品的零售价格、提高回收再制造率和供应链总利润,进而给出了协调单生产商和n个零售商决策的利润共享合同.最后的算例表明了模型的合理性和协调合同的有效性.     

制造商与渠道势力不对称零售商的合作广告模型研究

研究制造商与渠道势力不对称零售商的合作广告问题.在需求不确定的情况下,建立了制造商和零售商的分散式与集中式系统下的合作广告模型,得到了不同系统下制造商和强势零售商的最优合作广告策略、强势零售商和边缘零售商的最优订货策略,及他们的最优期望利润.通过对不同系统下均衡结果的比较分析,证明了分散式系统存在不协调.设计了实现渠道协调的联合契约,指出分散式协调系统下的联合契约不唯一,契约参数两两正相关,广告补贴率、产品批发价格和回购价格是制造商和强势零售商力量平衡的焦点.     

碳交易规制下信息不对称供应链的减排和低碳推广博弈研究

论文在碳交易规制下,研究单一制造商和双零售商组成的供应链减排与低碳推广决策以及零售商对制造商的成本信息分享问题,分析了零售商对制造商分享成本信息的条件,及不同情形下的制造商减排和零售商低碳推广策略。研究发现:零售商的最优低碳推广水平只与自身相关参数有关,零售商只有在自身低碳推广效率足够高时才会与制造商分享信息;制造商最优减排量随消费者低碳意识、碳交易价格、零售商低碳推广效率及其不确定性增大而提高,随零售商之间竞争程度提高而降低;无论零售商是否对制造商分享成本信息,供应链成员的最优利润随零售商之间竞争程度提高而增加,随消费者低碳意识、碳交易价格提高而提高;零售商低碳推广效率的不确定性越大则制造商的最优利润越低,零售商的最优利润越高;仅一家零售商分享成本信息时,制造商无法通过转移支付使另一家零售商与其分享信息。     

A note on channel performance under consignment contract with revenue sharing

Wang et al. [Y. Wang, L. Jiang, Z.J. Shen, Channel performance under consignment contract with revenue sharing. Management Science 50 (2004), 34–47] indicate that a decentralized supply chain cannot be perfectly coordinated. This note provides a cooperative game model that implements profit sharing between the manufacturer and the retailer to achieve their cooperation. When the manufacturer and the retailer are assumed to be risk-neutral, under a very mild restriction on the demand distribution function, the cooperative game model can achieve its unique equilibrium solution in iso-price-elastic or linear demand case. Under the revenue sharing agreement attached with the equilibrium payment scheme, the decentralized supply chain can be perfectly coordinated.