Optimal Advertising and Pricing in a Dynamic Durable Goods Supply Chain |
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Authors: | Anshuman Chutani Suresh P. Sethi |
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Affiliation: | (1) School of Management, Binghamton University, State University of New York, PO Box 6000, Binghamton, NY 13902, USA;(2) School of Management, The University of Texas at Dallas, Mail Station SM30, 800 W. Campbell Rd., Richardson, TX 75080-3021, USA |
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Abstract: | Cooperative advertising is an incentive offered by a manufacturer to influence retailers’ promotional decisions. We study a dynamic durable goods duopoly with a manufacturer and two independent and competing retailers. The manufacturer, as a Stackelberg leader, announces his wholesale prices and his shares of retailers’ advertising costs, and the retailers in response play a Nash differential game in choosing their optimal retail prices and advertising efforts over time. We obtain the feedback equilibrium policies for the manufacturer and the retailers in explicit form for a linear demand formulation. We investigate issues, like channel coordination and antidiscriminatory legislation, and also study a case, when the manufacturer sells through only one retailer and the second retailer sells a competing brand. |
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