National advertising and cooperation in a manufacturer-two-retailers channel
AbstractWe consider a supply channel composed of one manufacturer and two retailers. Three cases are studied. The non-cooperative one is a leader-follower relationship. The manufacturer determines his spending in national advertising and the whole sale price. Then, the retailers determine non-cooperatively the price for consumers. The second case is a partial-cooperative one where retailers decide jointly for the price. In the third case, all members of the channel cooperate by maximizing a joint profit function. The spending in advertising and the quantity sold are the lowest in the partial-cooperative case, while retailers' price is the highest. Interestingly, when the degree of substituability between the two products proposed by retailers is low, these latter are worse off with partial-cooperation with respect to non-cooperation. Partial-cooperation is always the worst case for the manufacturer, the whole channel, consumers' surplus and social welfare, while cooperation is the best case. Cooperating members can share the extra-profit by a whole sale price.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 35016.
Date of creation: Nov 2011
Date of revision:
Game theory; Manufacturer-two-retailers; National advertising; Cooperation;
Other versions of this item:
- Slim Ben Youssef, 2013. "National Advertising and Cooperation in a Manufacturer-Two Retailers Channel," International Review of Management and Marketing, Econjournals, vol. 3(2), pages 75 - 85.
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
- M30 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-12-13 (All new papers)
- NEP-COM-2011-12-13 (Industrial Competition)
- NEP-MKT-2011-12-13 (Marketing)
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