Cooperative Advertising Research Articles

Cooperation of advertising companies in social networks: A graph and game theory approaches

Abstract Advertisement in companies that are active in social network is becoming a key success factor these days. The cooperative advertising enables companies to improve effectiveness of the advertisement efforts. In this research, we first present a mathematical model to quantify the profit of cooperation between the companies in a network. Afterwards, cooperative game theory methods such as Shapley value, Core-center, Least core, and τ-value are proposed to distribute benefits of the cooperative advertisement of the companies in the social networks. A numerical example of a simple social network with three advertising companies is presented to evaluate results of the models. It is shown that the profit obtained from coalition is greater than individual profits of the members. In this regard, fair allocation of the extra profit among companies ensures their satisfaction and long-term cooperation.

Cooperative advertising: A way escaping from the prisoner’s dilemma in a supply chain with sticky price

This paper develops a differential game in a two-player supply chain with sticky price where a manufacturer provides a cooperative advertising program for a retailer. The manufacturer sets the wholesale price while the retailer decides the order quantity and advertising level. Either of the players has two behavioral choices: Myopia and farsightedness. We derive and compare the equilibrium strategies under four different behavioral combinations of the two players. Our analysis shows that, to be farsighted is the equilibrium behavior-choice result for the manufacturer and the retailer, while either of the players prefers a myopic partner. When the marginal contribution of the advertising to the notional price is low, instead of the farsighted equilibrium behavior, both players achieve the Pareto optimality when acting myopically, which traps them into a prisoner’s dilemma. Meanwhile, the myopia of both players is most desirable for the whole supply chain. When both the advertising’s marginal contribution to the notional price and the advertising subsidy rate are sufficiently high, not only can the players escape from the prisoner’s dilemma, but also their farsighted behavior-choice equilibrium can make them realize the Pareto optimality. Furthermore, a low degree of price stickiness helps the players escape from the prisoner’s dilemma and achieve their Pareto optimality at the farsighted equilibrium more easily, and a negotiated advertising subsidy rate enlarges this benefit.

Vendor Management Inventory with consignment contracts and the benefits of cooperative advertising

Most of the cooperative advertising literature has focused on studying the effects of such programs considering marketing variables. This paper integrates production and inventory management with pricing and advertising considerations to assess the effects of cooperative advertising programs in bilateral monopolies. We consider a supply chain where a Vendor Managed Inventory (VMI) along with a consignment contract is implemented to coordinate the chain. We develop and solve a differential model for two games. The first one is a benchmark scenario where no cooperative advertising is offered, while the manufacturer offers the cooperative program in the second game. The main results show that cooperative advertising programs, usually considered as successful marketing initiatives, can be very difficult to implement in a supply chain undertaking a VMI policy with a consignment contract, in which operations and marketing interface is taken into account. A cooperative program mainly hurts the manufacturer’s profits, and can be profit-Pareto-improving only in a few cases. Although the retailer is generally willing to receive a support from the manufacturer, she can opt for a non-cooperative program when the largest part of the supply chain profits goes to the manufacturer. We developed several special cases to strengthen our findings.

Dynamics and implications on a cooperative advertising model in the supply chain

In this paper, the theory of nonlinear dynamic system is applied to a cooperative advertising model in the supply chain, where the decision-making mechanism of firms is modeled as a dynamic adjustment process and the advertising response is assumed to be an exponential function. We find four possible Nash equilibrium points in this dynamic system and provide the conditions for their existence. After that, we analyze the impacts of key parameters on the stability of the positive Nash equilibrium point and prove that two kinds of bifurcation may occur when this positive Nash equilibrium point becomes unstable. Finally, sensitivity analysis and robustness test are performed to obtain some managerial insights. This study provides some valuable insights both into the cooperative advertising programs and into the features of dynamic game with exponential demand function.

Differential game model of joint emission reduction strategies and contract design in a dual-channel supply chain

Abstract Joint emission reduction is widely used in low-carbon supply chain practices. It consists of the manufacturer's emission reduction and the retailer's advertising campaign. In this paper, we present a differential game that involves one manufacturer and one retailer in a dual-channel supply chain under low-carbon environment. We analyze the optimal equilibrium strategies in centralized and decentralized dual-channel supply chains, and compare the results of the single channel and dual-channel supply chains. We also discuss how the cooperative advertising contract and the cooperative advertising and emission reduction cost sharing contract affect the optimal strategies and coordination of dual-channel supply chains. Our results suggest that the emission reduction level trajectory is monotonic, whereas the goodwill trajectory changes direction once at most. Wholesale price and the degree of customer loyalty to the retail channel exert a significant influence on optimal strategies. Manufacturer's profit and emission reduction effort are higher and retailer's profit and advertising effort are lower in a dual-channel supply chain than in a single channel supply chain. The cooperative advertising and emission reduction cost sharing contract is more efficient than the cooperative advertising contract under certain conditions, and a high low-carbon and brand preference of consumers indicates a greater likelihood that the supply chain members will adopt the contract. The results can provide a theoretical basis for supply chain members to make optimal decisions and choose the appropriate contract in a dual-channel supply chain under low-carbon environment.

Dynamic cooperative advertising under manufacturer and retailer level competition

We study dynamic cooperative advertising decisions in a market that consists of a finite number of independent manufacturers and retailers. Each manufacturer sells its product through all retailers and can offer different levels of advertising support to the retailers. Each retailer sells every manufacturer’s product and may choose to carry out a different amount of local advertising effort to promote the products. A manufacturer may offer to subsidize a fraction of the local advertising expense carried out by a retailer for its product, and this fraction is termed as that manufacturer’s subsidy rate for that retailer. We model a Stackelberg differential game with manufacturers as leaders and retailers as followers. A Nash game between the manufacturers determines their subsidy rates for the retailers and another Nash game between the retailers determines their optimal advertising efforts for the products they sell in response to manufacturers’ decisions. We obtain optimal policies in feedback form. In some special cases, we explicitly write the incentives for coop advertising as functions of different model parameters including the number of manufacturers and retailers, and study the impact of the competition at the manufacturer and the retailer levels. We analyse the profits of the players and find the model parameters under which a manufacturer benefits from a coop advertising program. Furthermore, in the case of two manufacturers and two retailers, we study the effect of various model parameters on all four subsidy rates. We also extend our model to include national level advertising by the manufacturer.

Selection and optimization of cooperative advertising strategies in supply chain based on stackelberg game method

With the intensification of market competition, the cost of advertising enterprises is increasing, so eventually, advertising may unable to increase the profits of enterprises and bring huge consumptions to enterprises. In this case, cooperative advertising came into being. With the Stackelberg game method, the selection and optimization of cooperative advertising strategies in supply chain were studied. Through the comparative analysis, the related concepts of supply chain competition, the level of cooperative advertising and Stackelberg game were determined; from the structures as two chains that are the non-integrated decision-making and the integrated decision-making, and two chains that are the integrated decision-making and the non-integrated decision-making, the existing problems were modeled and analyzed with the method of Stackelberg game theory; through numerical analysis, the optimal cooperative advertising strategy under the level of horizontal cooperation advertisement for each enterprise in the supply chain was obtained. Theoretical and empirical analysis can provide theoretical supports and model references for the research on strategy selection and optimization of cooperative advertising in other supply chains.

Channel Coordination with Cooperative Advertising Considering Effect of Advertising on Willingness to Pay

In this paper, cooperative advertising in a manufacturer–retailer supply chain is studied. Advertising can enhance willingness to pay (WTP) of customers. This trade-off between the benefits of increasing WTP of customers and the advertising expenditure is a key to understanding the retailers optimal advertising decision. On the other hand, it is interesting to understand in which condition supporting the retailer for his advertising expenditure is beneficial for the manufacturer. In this study, in order to capture pricing and advertising strategies of the channel member, three non-cooperative games including Nash, Stackelberg retailer and Stackelberg manufacturer game-theoretic models are established. In spite of the related studies which restrict price in order to prevent negative demand, the proposed model allows channel members to increase their prices by enhancing WTP of customers. In this study, contrary to similar additive form demand functions applied in the co-op ad literature which limits their studies for cases that profit function is concave with respect to variables, optimal prices and advertising strategies are obtained for all the solution space. Surprisingly for the very high values of the advertising effect coefficient, a finite optimal advertising expenditure is achieved.

A study of cooperative advertising in a one-manufacturer two-retailer supply chain based on the multi-stage dynamic game theory

In this paper, the coordination of cooperative advertising decisions is analysed in a supply chain with one manufacturer and two retailers. Suppose the manufacturer invests in national advertising and one retailer invests in local advertising, the manufacturer agrees to share part of the local advertising cost with the retailer. Meanwhile, the other retailer refuses to take part in cooperative advertising. The manufacturer and retailer who put investment in cooperative advertising could choose cooperative or non-cooperative attitude, but the other retailer always chooses non-cooperative attitude. We select four decision variables including local advertising effort, two retailers' marginal profits, and price of product to discuss seven three-stage dynamic game models according to the parties' attitudes being cooperative or not. Seven game models, including one non-cooperative model, five partial cooperative models and one cooperative model, are investigated in detail based on a whole mathematical analysis. By comparing the proposed seven models, several interesting propositions are obtained and the corresponding interesting results are also acquired via these propositions.

A study of cooperative advertising in a one-manufacturer two-retailer supply chain based on the multi-stage dynamic game theory

In this paper, the coordination of cooperative advertising decisions is analysed in a supply chain with one manufacturer and two retailers. Suppose the manufacturer invests in national advertising and one retailer invests in local advertising, the manufacturer agrees to share part of the local advertising cost with the retailer. Meanwhile, the other retailer refuses to take part in cooperative advertising. The manufacturer and retailer who put investment in cooperative advertising could choose cooperative or non-cooperative attitude, but the other retailer always chooses non-cooperative attitude. We select four decision variables including local advertising effort, two retailers' marginal profits, and price of product to discuss seven three-stage dynamic game models according to the parties' attitudes being cooperative or not. Seven game models, including one non-cooperative model, five partial cooperative models and one cooperative model, are investigated in detail based on a whole mathematical analysis. By comparing the proposed seven models, several interesting propositions are obtained and the corresponding interesting results are also acquired via these propositions.

Modeling dynamic cooperative advertising in a decentralized channel

This work deals with cooperative advertising in a manufacturer-retailer supply channel using differential game theory. It considers the manufacturer as the Stackelberg leader and the retailer as the follower. It incorporates the manufacturer?s advertising effort into Sethi?s sales-advertising dynamics, and considers its effect on the retail advertising effort, the awareness share, the players? payoffs, and the channel payoff. These are achieved by considering two channel structures: a situation where retail advertising is subsidized, and a situation where it is not. In both situations, it obtains the Stackelberg equilibrium, which characterizes the effects of the manufacturer?s advertising effort, including the relationships between the manufacturer?s advertising effort and the retailer?s advertising effort. The work shows that the direct involvement of the manufacturer in advertising is worthwhile.

Dynamic Impact of Online Word-of-Mouth and Advertising on Supply Chain Performance.

Cooperative (co-op) advertising investments benefit brand goodwill and further improve supply chain performance. Meanwhile, online word-of-mouth (OWOM) can also play an important role in supply chain performance. On the basis of co-op advertising, this paper considers a single supply chain structure led by a manufacturer and examines a fundamental issue concerning the impact of OWOM on supply chain performance. Firstly, by the method of differential game, this paper analyzes the dynamic impact of OWOM and advertising on supply chain performance (i.e., brand goodwill, sales, and profits) under three different supply chain decisions (i.e., only advertising, and manufacturers with and without sharing cost of OWOM with retailers). We compare and analyze the optimal strategies of advertising and OWOM under the above different supply chain decisions. Secondly, the system dynamics model is established to reflect the dynamic impact of OWOM and advertising on supply chain performance. Finally, three supply chain decisions under two scenarios, strong brand and weak brand, are analyzed through the system dynamics simulation. The results show that the input of OWOM can enhance brand goodwill and improve earnings. It further promotes the OWOM reputation and improves the supply chain performance if manufacturers share the cost of OWOM with retailers. Then, in order to eliminate the retailers from word-of-mouth fraud and establish a fair competition mechanism, the third parties (i.e., regulators or e-commerce platforms) should take appropriate punitive measures against retailers. Furthermore, the effect of OWOM on supply chain performance under a strong brand differed from those under a weak brand. Last but not least, if OWOM is improved, there would be more remarkable performance for the weak brand than that for the strong brand in the supply chain.

Supply Chain Models with Considerations of Co-Op Advertising and Capacity Constraints

Today’s marketing competition focuses on the supply chain members to make its own interests maximize through cooperation. This article establishes a simple secondary supply chain consisting of a retailer and a manufacturer. Through the establishment of a Stackelberg game model and a partnership game model, we study the decision of the member enterprises in the supply chain under the restriction of capacity. The research results show that if the production capacity is smaller, the manufacturer will choose full-load production. If the production capacity is sufficient, the manufacturer will no longer produce more products because its profit may be lost. The lack of production capacity makes the manufacturer not take the initiative to share the advertising costs of retailers. But when the capacity is sufficient, the manufacture shares 1/3 of advertising costs. In addition, whether manufacturers and retailers choose to cooperate in the case of a small capacity, the profit of the supply chain will not change.

Supply Chain Cooperative Advertising and Ordering Model for the Loss Averse Retailer

Supply Chain Cooperative Advertising and Ordering Model for the Loss Averse Retailer

Game Theoretic Analysis of Pricing and Cooperative Advertising in a Reverse Supply Chain for Unwanted Medications in Households

Improper disposal of household unwanted medications (UMs) is an emergency problem around the world that adversely affects the sustainability of the environment and human’s health. However, the current disposal practices, mainly based on advertising and collecting status, are unsatisfactory in most countries and regions. Thus, some scholars proposed an alternative disposal practice that is to provide incentives to customers. This study aims to compare a Single Model (advertising only) with a Joint Model (advertising with take-back pricing) in a two-echelon reverse supply chain (RSC) that is composed of one disposer and one collector. In each model, four games (non-cooperative, collector as the Stackelberg leader, disposer as the Stackelberg leader, and cooperative) were established in order to identify the optimal pricing and advertising strategies for both members. The results of the study indicate that there is a Pareto dominant range for Joint Model compared to Single Model, whereas Single Model has no Pareto improvement in any games. Furthermore, in non-cooperative games of Joint Model, it is better to implement the leader-follower structure rather than simultaneous movement structure. Additionally, it is verified that the cooperative game is feasible, which leads to the cooperation between the disposer and the collector, and the extra profit from the cooperation can be shared based on the Nash bargaining game. However, in Single Model, it is better for the disposer to act as a channel leader and the collector figures the follower.

Pricing and advertising decisions in a dominant-retailer supply chain: A multi-follower bi-level programming approach

Pricing and advertising is one of the most important decisions in each supply chain especially in the competitive environment. In the previous studies, this is as a centralized decision. However, if each channel member makes its decision independently, the utility of all members is optimized. In such decentralized situations, the channel members may have different market power that they influence on the other members’ decisions. These issues can modeled through leader-follower Stackelberg game or bi-level programming. This study investigates coordination of pricing and cooperative advertising in a two-stage supply chain consisting of one dominant-retailer and multiple competitive manufactures which produce several perishable and substitutable products. This paper aims to determine pricing and cooperative advertising decisions expenditure as well as the amount of manufacturers’ production or retailer’s purchase such that utility of all members is met. Hence, the problem is modeled as a multi-follower bi-level programming problem. Since it is proved that the model is NP-hard, the proposed model is solved through simulated annealing. A numerical example is used to show the impact of demand’s variations on the members’ decisions.

Cooperative advertising models in O2O supply chains

This paper examines cooperative advertising strategies in O2O supply chain made of a seller and an online platform agent. The seller sells a product to end market through both offline and online channels, the latter operated by the agent. We consider cooperative advertising strategies for this O2O supply chain and investigate three models, namely, Integration Model (I-Model), Unilateral co-op advertising model (U-Model), and Bilateral co-op advertising model (B-Model). We derive the optimal decisions of advertisement levels and participation rates between the supply chain members, and explore how they are linked to the interrelationship between the O2O channels and other system parameters. In addition, we provide comparison results among the three models and find that B-model can lead to significant benefits to the seller and the entire channel compared to U-model, especially under a high online profit share for the agent. However, the agent is undermined under B-model as he is obliged to share a portion of offline advertisement expenditure without corresponding compensations, which explains the difficulty in adopting bilateral advertising cooperation in real practice.

Incentive mechanism based on cooperative advertising for cost information sharing in a supply chain with competing retailers

This paper proposes a new motivation for information sharing in a decentralized channel consisting of a single manufacturer and two competing retailers. The manufacturer provides a common product to the retailers at the same wholesale price. Both retailers add their own values to the product and distribute it to consumers. Factors such as retail prices, values added to the product, and local advertising of the retailers simultaneously have effect on market demand. Each retailer has full information about the own added value which is unknown to the manufacturer and other retailer. The manufacturer uses a cooperative advertising program for motivating the retailers to disclose their private information. A numerical study is presented to compare different scenarios of information sharing. Computational results show that there is a condition in which full information sharing is beneficial for all members of the supply chain through cooperative advertising program and, therefore, retailers have enough incentive to disclose their cost information to the manufacturer.

A bi-level programming model for decentralized manufacturer-distributer supply chain considering cooperative advertising

This paper studies a bi-level decentralized supply chain consisting of one manufacturer and one distributor. Along with global advertising, the manufacturer participates in part of local advertising expenditure incurred by the distributor. Bi-level programming is applied to model the relationship between the manufacturer and distributer under two power scenarios of Stackelberg game framework. In the first scenario, we consider the manufacturer as the leader and in the latter, we allow the distributer to act as the dominant member of the supply chain. In order to tackle bi-level programming models, a meta-heuristic genetic algorithm with hierarchical structure is developed for each scenario and optimal policies for the members in terms of pricing, advertising, inventory and demand allocation are determined. Finally, several computational experiments are conducted on data obtained from an automotive spare parts supply chain to demonstrate the validity of the developed models and compare the benefits of members as well as of the entire system.

Cooperative advertising to induce strategic customers for purchase at the full price

AbstractIn this paper, cooperative advertising in a manufacturer–retailer supply chain in the presence of the strategic customer is studied. It is assumed that a proportion of the customers strategically postpone their purchase in order to achieve a higher surplus. Advertising can enhance the willingness to pay (WTP) of the customers and, as a result, their surplus. In this paper, the effect of cooperative advertising in order to induce customers for early purchase is analyzed. While customer purchasing in the full price leads to higher income for the retailer, it requires spending more on advertising. This trade‐off between the benefits of inducing customers to early purchases and the advertising expenditure is a key to understanding the retailer's optimal advertising decision. On the other hand, it is interesting for the manufacturer to find out when supporting the retailer for its advertising expenditure is beneficial. Nash and Stackelberg (manufacturer as a leader) game‐theoretic models are established to investigate whether, in the channel, it is optimal to induce customers by increasing advertising expenditure or not. Results of the Stackelberg game show that the manufacturer participates in the retailer's advertising expenditure only if it leads to early purchasing of the strategic customers and the participation rate depends on the wholesale price. From the retailer's point of view, when the impact of advertising on the WTP of customers is not significant, the more the proportion of strategic customers, the more inducing customers for early purchase is beneficial. When advertising effectively increases WTP, regardless of the fraction of strategic customers, it is beneficial for the retailer to enhance its advertising in order to dissuade customers from postponing their purchase.