IDEAS home Printed from https://ideas.repec.org/a/taf/tprsxx/v54y2016i9p2541-2551.html
   My bibliography  Save this article

Impact of demand price elasticity on advantages of cooperative advertising in a two-tier supply chain

Author

Listed:
  • Lei Zhao
  • Jihua Zhang
  • Jinxing Xie

Abstract

This paper focuses on pricing and vertical cooperative advertising decisions in a two-tier supply chain. Using a Stackelberg game model where the manufacturer acts as the game leader and the retailer acts as the game follower, we obtain closed-form equilibrium solution and explicitly show how pricing and advertising decisions are made. When market demand decreases exponentially with respect to the retail price and increases with respect to national and local advertising expenditures in an additive way, the manufacturer benefits from providing percentage reimbursement for the retailer’s local advertising expenditure when demand price elasticity is large enough. Whether the manufacturer benefits from cooperative advertising is also closely related to supply chain member’s relative advertising efficiency. In the decision for adopting coop advertising strategy, it is critical for the manufacturer to identify how market demand depends on national and local advertisements. The findings from this research can enhance our understanding of cooperative advertising decisions in a two-tier supply chain with price-dependent demand.

Suggested Citation

  • Lei Zhao & Jihua Zhang & Jinxing Xie, 2016. "Impact of demand price elasticity on advantages of cooperative advertising in a two-tier supply chain," International Journal of Production Research, Taylor & Francis Journals, vol. 54(9), pages 2541-2551, May.
    • Handle: RePEc:taf:tprsxx:v:54:y:2016:i:9:p:2541-2551
    DOI: 10.1080/00207543.2015.1096978
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/00207543.2015.1096978
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/00207543.2015.1096978?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Yue, Jinfeng & Austin, Jill & Wang, Min-Chiang & Huang, Zhimin, 2006. "Coordination of cooperative advertising in a two-level supply chain when manufacturer offers discount," European Journal of Operational Research, Elsevier, vol. 168(1), pages 65-85, January.
    2. Jorgensen, Steffen & Zaccour, Georges, 2003. "Channel coordination over time: incentive equilibria and credibility," Journal of Economic Dynamics and Control, Elsevier, vol. 27(5), pages 801-822, March.
    3. SeyedEsfahani, Mir Mehdi & Biazaran, Maryam & Gharakhani, Mohsen, 2011. "A game theoretic approach to coordinate pricing and vertical co-op advertising in manufacturer-retailer supply chains," European Journal of Operational Research, Elsevier, vol. 211(2), pages 263-273, June.
    4. Aust, Gerhard & Buscher, Udo, 2012. "Vertical cooperative advertising and pricing decisions in a manufacturer–retailer supply chain: A game-theoretic approach," European Journal of Operational Research, Elsevier, vol. 223(2), pages 473-482.
    5. Jørgensen, Steffen & Zaccour, Georges, 2014. "A survey of game-theoretic models of cooperative advertising," European Journal of Operational Research, Elsevier, vol. 237(1), pages 1-14.
    6. Huang, Zhimin & Li, Susan X., 2001. "Co-op advertising models in manufacturer-retailer supply chains: A game theory approach," European Journal of Operational Research, Elsevier, vol. 135(3), pages 527-544, December.
    7. Szmerekovsky, Joseph G. & Zhang, Jiang, 2009. "Pricing and two-tier advertising with one manufacturer and one retailer," European Journal of Operational Research, Elsevier, vol. 192(3), pages 904-917, February.
    8. Aust, Gerhard & Buscher, Udo, 2014. "Cooperative advertising models in supply chain management: A review," European Journal of Operational Research, Elsevier, vol. 234(1), pages 1-14.
    9. Xie, Jinxing & Wei, Jerry C., 2009. "Coordinating advertising and pricing in a manufacturer-retailer channel," European Journal of Operational Research, Elsevier, vol. 197(2), pages 785-791, September.
    10. Karray, Salma & Zaccour, Georges, 2006. "Could co-op advertising be a manufacturer's counterstrategy to store brands?," Journal of Business Research, Elsevier, vol. 59(9), pages 1008-1015, September.
    11. S. Jørgensen & G. Zaccour, 1999. "Equilibrium Pricing and Advertising Strategies in a Marketing Channel," Journal of Optimization Theory and Applications, Springer, vol. 102(1), pages 111-125, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Karray, Salma & Martín-Herrán, Guiomar & Sigué, Simon Pierre, 2022. "Managing advertising investments in marketing channels," Journal of Retailing and Consumer Services, Elsevier, vol. 65(C).
    2. Meina Hua & Huajun Tang & Ivan Ka Wai Lai, 2017. "Game Theoretic Analysis of Pricing and Cooperative Advertising in a Reverse Supply Chain for Unwanted Medications in Households," Sustainability, MDPI, vol. 9(10), pages 1-31, October.
    3. Gou, Qinglong & Shao, Jing & Wang, Xin & Yu, Lili, 2020. "Co-op supply chains with a local media company: Models and analysis," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 136(C).
    4. Mohammed Alkahtani & Qazi Salman Khalid & Muhammad Jalees & Muhammad Omair & Ghulam Hussain & Catalin Iulian Pruncu, 2021. "E-Agricultural Supply Chain Management Coupled with Blockchain Effect and Cooperative Strategies," Sustainability, MDPI, vol. 13(2), pages 1-29, January.
    5. Qian, Zhifeng & Day, Steven James & Ignatius, Joshua & Dhamotharan, Lalitha & Chai, Junwu, 2024. "Digital advertising spillover, online-exclusive product launches, and manufacturer-remanufacturer competition," European Journal of Operational Research, Elsevier, vol. 313(2), pages 565-586.
    6. Jinhui Han & Suresh P. Sethi & Chi Chung Siu & Sheung Chi Phillip Yam, 2023. "Co‐op advertising in randomly fluctuating markets," Production and Operations Management, Production and Operations Management Society, vol. 32(6), pages 1617-1635, June.
    7. Zihui Yang & Qingchun Meng & Zheng Fang & Xiaona Zhang, 2024. "Supply Chain Elastic Strain," Mathematics, MDPI, vol. 12(12), pages 1-15, June.
    8. He, Yi & Wang, Hang & Guo, Qiang & Xu, Qingyun, 2019. "Coordination through cooperative advertising in a two-period consumer electronics supply chain," Journal of Retailing and Consumer Services, Elsevier, vol. 50(C), pages 179-188.
    9. Yan Wang & Shue Mei & Weijun Zhong, 2022. "Advertising or recommender systems? A game‐theoretic analysis of online retailer platforms' decision‐making," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 2119-2132, September.
    10. Soroush Safarzadeh, 2023. "A game theoretic approach for pricing and advertising of an integrated product family in a duopoly," Journal of Combinatorial Optimization, Springer, vol. 45(5), pages 1-26, July.
    11. Wang Yuyan & Yu Zhaoqing, 2018. "Research on Advertising and Pricing in E-Supply Chain Under Different Dominant Modes," Journal of Systems Science and Information, De Gruyter, vol. 6(1), pages 58-68, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ata Allah Taleizadeh & Zahedeh Cheraghi & Leopoldo Eduardo Cárdenas-Barrón & Mahsa Noori-Daryan, 2021. "Studying the Effect of Noise on Pricing and Marketing Decisions of New Products under Co-op Advertising Strategy in Supply Chains: Game Theoretical Approaches," Mathematics, MDPI, vol. 9(11), pages 1-26, May.
    2. Zhou, Yong-Wu & Li, Jicai & Zhong, Yuanguang, 2018. "Cooperative advertising and ordering policies in a two-echelon supply chain with risk-averse agents," Omega, Elsevier, vol. 75(C), pages 97-117.
    3. Dridi, Dhouha & Ben Youssef, Slim, 2015. "Local advertising externalities and cooperation in one manufacturer-two retailers channel," MPRA Paper 62705, University Library of Munich, Germany.
    4. Aust, Gerhard & Buscher, Udo, 2014. "Cooperative advertising models in supply chain management: A review," European Journal of Operational Research, Elsevier, vol. 234(1), pages 1-14.
    5. Xu, Xiaoyan & Choi, Tsan-Ming & Chung, Sai-Ho & Guo, Shu, 2023. "Collaborative-commerce in supply chains: A review and classification of analytical models," International Journal of Production Economics, Elsevier, vol. 263(C).
    6. Juan Zhang & Qinglong Gou & Susan Li & Zhimin Huang, 2017. "Cooperative Advertising with Accrual Rate in a Dynamic Supply Chain," Dynamic Games and Applications, Springer, vol. 7(1), pages 112-130, March.
    7. Salma Karray & Chirag Surti, 2016. "Channel coordination with quantity discounts and/or cooperative advertising," International Journal of Production Research, Taylor & Francis Journals, vol. 54(17), pages 5317-5335, September.
    8. Meina Hua & Huajun Tang & Ivan Ka Wai Lai, 2017. "Game Theoretic Analysis of Pricing and Cooperative Advertising in a Reverse Supply Chain for Unwanted Medications in Households," Sustainability, MDPI, vol. 9(10), pages 1-31, October.
    9. Jørgensen, Steffen & Zaccour, Georges, 2014. "A survey of game-theoretic models of cooperative advertising," European Journal of Operational Research, Elsevier, vol. 237(1), pages 1-14.
    10. Giri, B.C. & Sharma, S., 2014. "Manufacturer's pricing strategy in a two-level supply chain with competing retailers and advertising cost dependent demand," Economic Modelling, Elsevier, vol. 38(C), pages 102-111.
    11. Ahmadi-Javid, Amir & Hoseinpour, Pooya, 2012. "On a cooperative advertising model for a supply chain with one manufacturer and one retailer," European Journal of Operational Research, Elsevier, vol. 219(2), pages 458-466.
    12. Gerhard Aust & Udo Buscher, 2016. "Game theoretic analysis of pricing and vertical cooperative advertising of a retailer-duopoly with a common manufacturer," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 24(1), pages 127-147, March.
    13. Tinglong Zhang & Xiongfei Guo & Jin Hu & Ningning Wang, 2020. "Cooperative advertising models under different channel power structure," Annals of Operations Research, Springer, vol. 291(1), pages 1103-1125, August.
    14. Shi, Hongyan & Liu, Yunchuan & Petruzzi, Nicholas C., 2019. "Informative advertising in a distribution channel," European Journal of Operational Research, Elsevier, vol. 274(2), pages 773-787.
    15. SeyedEsfahani, Mir Mehdi & Biazaran, Maryam & Gharakhani, Mohsen, 2011. "A game theoretic approach to coordinate pricing and vertical co-op advertising in manufacturer-retailer supply chains," European Journal of Operational Research, Elsevier, vol. 211(2), pages 263-273, June.
    16. Wang, Charles X. & Qian, Zhuang & Zhao, Yabing, 2018. "Impact of manufacturer and retailer's market pricing power on customer satisfaction incentives in supply chains," International Journal of Production Economics, Elsevier, vol. 205(C), pages 98-112.
    17. Dridi, Dhouha & Ben Youssef, Slim, 2015. "A Game Theoretic Framework for Competing/Cooperating Retailers under price and advertising dependent demand," MPRA Paper 63317, University Library of Munich, Germany.
    18. Li, Xiang & Li, Yongjian & Cao, Wenjing, 2019. "Cooperative advertising models in O2O supply chains," International Journal of Production Economics, Elsevier, vol. 215(C), pages 144-152.
    19. Aust, Gerhard & Buscher, Udo, 2012. "Vertical cooperative advertising and pricing decisions in a manufacturer–retailer supply chain: A game-theoretic approach," European Journal of Operational Research, Elsevier, vol. 223(2), pages 473-482.
    20. Karray, Salma, 2013. "Periodicity of pricing and marketing efforts in a distribution channel," European Journal of Operational Research, Elsevier, vol. 228(3), pages 635-647.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:tprsxx:v:54:y:2016:i:9:p:2541-2551. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/TPRS20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.