A game theoretical study of cooperative advertising in a single-manufacturer-two-retailers supply chain

In recent years, there has been considerable research on cooperative (Co) advertising in a single-retailer-single-manufacturer supply chain. Due to the scarcity of research on game theoretical models with multiple retailers, in this study, we discuss the case on how the manufacturer coordinates the channel in which two identical retailers compete on local advertising investment. We examine four non-cooperative models. In each of these models, either Stackelberg or Nash game is played between the echelons, and the duopolistic retailers follow either Cournot or collusion behavior. In addition, we discuss the cooperative game in order to investigate the possibility of channel coordination and, then, a cost sharing contract is proposed to achieve a perfect coordination of the channel. Finally, a Nash bargaining model is utilized in order to determine the fraction of local advertising costs shared by the manufacturer and to discuss how the channel members should split the extra profit obtained by moving to a cooperation case.

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