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A game theoretic approach for advertising and pricing decisions using a new environmental transparency-based demand function considering different government policies

Author

Listed:
  • Hossein Khosroshahi

    (Isfahan University of Technology)

  • Seyed Reza Hejazi

    (Isfahan University of Technology)

Abstract

This research considers advertising and corporate social responsibility (CSR) in a supply chain. The supply chain composed of a retailer and a manufacturer is considered. It is assumed that the manufacturer chooses one of two strategies: the manufacturer is only concerned with its profit, and the manufacturer is concerned with society's satisfaction level in addition to its profit. Accordingly, in the second strategy, the manufacturer has a utility consisting of profit and consumer satisfaction. Concerning the manufacturer over consumers, satisfaction is assumed as the CSR concern. Therefore, in this study, a measure for determining the satisfaction level in society is developed for the first time. Moreover, we assume that the manufacturer could have environmental transparency in advertising when facing its customers. Hence, it is considered that the demand function is sensitive to advertising transparency. The effect of advertising transparency on the demand function is also considered in this paper. In addition, we assume that the supply chain members are rivals and tend to determine their equilibrium decision variables to earn the maximum profit or utility. At last, based upon the equilibrium values of variables, some analysis and managerial insights are proposed. For instance, when the manufacturer is concerned with CSR, the equilibrium advertising, demand, and the profit of the retailer are higher and the wholesale and retail prices are lower than when he is not concerned about CSR.

Suggested Citation

  • Hossein Khosroshahi & Seyed Reza Hejazi, 2024. "A game theoretic approach for advertising and pricing decisions using a new environmental transparency-based demand function considering different government policies," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(5), pages 11145-11170, May.
    • Handle: RePEc:spr:endesu:v:26:y:2024:i:5:d:10.1007_s10668-023-03228-7
    DOI: 10.1007/s10668-023-03228-7
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