Cooperative advertising coordination in two-level supply channel using differential game

There are a lot of models in the cooperative advertising literature, however, only a few have considered channel coordination, and much fewer on the possibility of implementation. This work examines cooperative advertising in a bilateral monopoly using game theory. It considers a two-way coordination strategy in which the manufacturer who is the Stackelberg leader engages in national advertising and provides subsidy for retail advertising while the retailer who is the follower engages in local advertising and provides motivational advertising support to the manufacturer. The work considers four game scenarios. For each scenario, it determines the players' optimal advertising efforts and payoffs based on the advertising supports. The work observes that the players' performances and channel performance are worst with non-provision of support. The retailer performs best with manufacturer's support, while the manufacturer and the entire channel performances are best with mutual support for each other.