Cooperative Advertising Strategy Selection Problem for considering Pricing and Advertising Decisions in a Two-Period Online Supply Chain

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Abstract

This article studies the cooperative advertising problem of a two-period online supply chain consisting of a manufacturer and an online retail platform. The manufacturer provides national advertising in the first period to build the brand image and increase the awareness of the product. And the online retail platform provides platform advertising for selling the product to consumers on its platform during two periods. The manufacturer and the online retail platform may choose different cooperative advertising strategies for national advertising and platform advertising, which are one-way subsidy strategy, two-way subsidy strategy, and revenue-share strategy. We formulate a Stackelberg game model to study the cooperative advertising problem by taking price and advertising effect into account and analyze how the profit is influenced in different cooperative advertising strategies. We find that under the revenue-share strategy, the manufacturer provides a higher subsidy rate for the online retail platform advertising than that in other cooperative advertising strategies. Interestingly, there are conditions where, while just the manufacturer contributes a percentage of the platform advertising and the online retail platform has no effort on the national advertising, the total profit would be better than that in revenue-share strategy even in revenue-share strategy, the cooperative relationship is closer between the manufacture and the online retail platform.

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