Advertising coordination games of a manufacturer and a retailer while introducing a new product |
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Authors: | Alessandra Buratto Luca Grosset Bruno Viscolani |
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Institution: | (1) Dipartimento di Matematica Pura e Applicata, Università di Padova, Via Trieste 63, 35121 Padova, Italy |
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Abstract: | 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. |
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Keywords: | Advertising Market segmentation Distribution channel Nash equilibrium Stackelberg equilibrium |
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