Back
 AJIBM  Vol.9 No.4 , April 2019
Cooperative Advertising in a Two-Stage Supply Chain with Network Externalities
Abstract:
A two-stage game is developed with network externalities where, besides pricing decisions, the retailer and manufacturer can determine their advertising investments and advertising participation rates for each stage. In addition to the full cooperation advertising model, three part cooperation advertising models are established. We develop propositions and insights from the comparison of these models. Our main findings are as follows: 1) the equilibrium solutions critically depend on the effects of network externalities; 2) the optimal choice in a two-stage game is to achieve full cooperation; and 3) a second-best choice for the manufacturer is to share the retailer’s advertising in the first stage. Our research results have guiding significance for supply chain member’s decision-making in local advertising practice.
Cite this paper: Li, W. (2019) Cooperative Advertising in a Two-Stage Supply Chain with Network Externalities. American Journal of Industrial and Business Management, 9, 1011-1023. doi: 10.4236/ajibm.2019.94069.
References

[1]   Pei, Z., Toombs, L. and Yan, R. (2014) How Does the Added New Online Channel Impact the Supporting Advertising Expenditure? Journal of Retailing and Consumer Services, 21, 229-238. https://doi.org/10.1016/j.jretconser.2014.02.004

[2]   Yang, J., Xie, J., Deng, X. and Xiong, H. (2013) Cooperative Advertising in a Distribution Channel with Fairness Concerns. European Journal of Operational Research, 227, 401-407. https://doi.org/10.1016/j.ejor.2012.12.011

[3]   Martín, H., Guiomar, S. and Simon, P. (2017) An Integrative Framework of Cooperative Advertising: Should Manufacturers Continuously Support Retailer Advertising? Journal of Business Research, 12, 67-73. https://doi.org/10.1016/j.jbusres.2016.07.005

[4]   Xie, J. and Wei, J.C. (2009) Coordinating Advertising and Pricing in a Manufacturer-Retailer Channel. European Journal of Operational Research, 197, 785-791.
https://doi.org/10.1016/j.ejor.2008.07.014

[5]   Huang, Z. and Li, S.X. (2001) Co-Op Advertising Models in Manufacturer-Retailer Supply Chains: A Game Theory Approach. European Journal of Operational Research, 135, 527-544.
https://doi.org/10.1016/S0377-2217(00)00327-1

[6]   Li, S.X., Huang, Z., Zhu, J. and Chau, P.Y. (2002) Cooperative Advertising, Game Theory and Manufacturer-Retailer Supply Chains. Omega, 30, 347-357.
https://doi.org/10.1016/S0305-0483(02)00051-8

[7]   He, X., Prasad, A. and Sethi, S.P. (2009) Cooperative Advertising and Pricing in a Dynamic Stochastic Supply Chain: Feedback Stackelberg Strategies. Production and Operations Management, 18, 78-94. https://doi.org/10.1111/j.1937-5956.2009.01006.x

[8]   Aust, G. and Buscher, U. (2014) Cooperative Advertising Models in Supply Chain Management: A Review. European Journal of Operational Research, 234, 1-14.
https://doi.org/10.1016/j.ejor.2013.08.010

[9]   Katz, M.L. and Shapiro, C. (1985) Network Externalities, Competition, and Compatibility. The American Economic Review, 75, 424-440.

[10]   Kretschmer, T. and Rosner, M. (2010) Increasing Dominance—The Role of Advertising, Pricing and Product Design. Discussion Papers in Business Administration.
https://ssrn.com/abstract=1545754
https://doi.org/10.2139/ssrn.1545754

[11]   Sigué, P. and Chintagunta, S. (2009) Pradeep Advertising Strategies in a Franchise System. European Journal of Operational Research, 198, 655-665.
https://doi.org/10.1016/j.ejor.2008.09.027

[12]   Cai, G.S., Chiang, W.C. and Chen, X.F. (2010) Game Theoretic Pricing and Ordering Decisions with Partial Lost Sales in Two-Stage Supply Chains. International Journal of Production Economics, 130, 175-185. https://doi.org/10.1016/j.ijpe.2010.12.007

[13]   Prasad, A., Venkatesh, R. and Mahajan, V. (2010) Optimal Bundling of Technological Products with Network Externality. Management Science, 56, 2224-2236.
https://doi.org/10.1287/mnsc.1100.1259

 
 
Top