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National advertising and cooperation in a manufacturer-two-retailers channel

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  • Ben Youssef, Slim
  • Dridi, Dhouha

Abstract

We 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.

Suggested Citation

  • Ben Youssef, Slim & Dridi, Dhouha, 2011. "National advertising and cooperation in a manufacturer-two-retailers channel," MPRA Paper 35016, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:35016
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    References listed on IDEAS

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    1. Yue, Jinfeng & Austin, Jill & Wang, Min-Chiang & Huang, Zhimin, 2006. "Coordination of cooperative advertising in a two-level supply chain when manufacturer offers discount," European Journal of Operational Research, Elsevier, vol. 168(1), pages 65-85, January.
    2. SeyedEsfahani, Mir Mehdi & Biazaran, Maryam & Gharakhani, Mohsen, 2011. "A game theoretic approach to coordinate pricing and vertical co-op advertising in manufacturer-retailer supply chains," European Journal of Operational Research, Elsevier, vol. 211(2), pages 263-273, June.
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    5. Salma Karray & Georges Zaccour, 2007. "Effectiveness Of Coop Advertising Programs In Competitive Distribution Channels," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 9(02), pages 151-167.
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    Cited by:

    1. Dridi, Dhouha & Ben Youssef, Slim, 2015. "Local advertising externalities and cooperation in one manufacturer-two retailers channel with exogenous marginal profits," MPRA Paper 62697, University Library of Munich, Germany.
    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. 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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    More about this item

    Keywords

    Game theory; Manufacturer-two-retailers; National advertising; Cooperation;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • M30 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - General

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