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Periodicity of pricing and marketing efforts in a distribution channel

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  • Karray, Salma

Abstract

Most research about cooperative (coop) advertising programs in channels relies on the assumption that manufacturers and retailers decide of pricing and marketing efforts simultaneously. This paper evaluates this central assumption and investigates the optimal periodicity (sequence of move) of pricing and marketing efforts (ME) decisions for a distribution channel. We develop a game theoretic model that accounts for pricing at each level of the channel, for the manufacturer’s ME mix strategies (a direct ME to consumers and coop advertising program offered to the retailer) and the retailer’s ME as well. We obtain solutions for a bilateral channel under different vertical interaction scenarios; when the channel is led by the manufacturer, the retailer or when channel members decide simultaneously of each of their marketing mix decisions (vertical Nash). We compare the effect of pricing and ME decision periodicity on outputs for each channel member. The main findings suggest that simultaneous decision-making of pricing and ME is optimal only for high enough levels of the manufacturer’s ME effects. For very highly effective marketing efforts, sequential play of pricing and ME allows channel members to implement equilibrium strategies and achieve maximum profits that would not be achieved with simultaneous decision-making. This highlights the importance of relaxing the simultaneous play assumption of pricing and ME in a distribution channel.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:ejores:v:228:y:2013:i:3:p:635-647
    DOI: 10.1016/j.ejor.2013.02.012
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    References listed on IDEAS

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    Cited by:

    1. Karray, Salma & Martín-Herrán, Guiomar & Zaccour, Georges, 2017. "Assessing the profitability of cooperative advertising programs in competing channels," International Journal of Production Economics, Elsevier, vol. 187(C), pages 142-158.
    2. 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.
    3. 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.
    4. Karray, Salma & Martín-Herrán, Guiomar & Sigué, Simon-Pierre, 2017. "Cooperative advertising for competing manufacturers: The impact of long-term promotional effects," International Journal of Production Economics, Elsevier, vol. 184(C), pages 21-32.
    5. Karray, Salma & Sigué, Simon Pierre, 2015. "A game-theoretic model for co-promotions: Choosing a complementary versus an independent product ally," Omega, Elsevier, vol. 54(C), pages 84-100.
    6. repec:eee:proeco:v:191:y:2017:i:c:p:37-50 is not listed on IDEAS
    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. 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.

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