The effects of decision timing for pricing and marketing efforts in a supply chain with competing manufacturers

Producción CientíficaThis paper investigates the impact of decision timing for pricing and marketing efforts in a supply chain led by competing manufacturers. We develop and solve six games to consider the scenarios (games) where prices and marketing efforts (ME) are decided simultaneously, and when they are not (i.e., ME is set either before or after prices). We examine these three scenarios for the benchmark case of a bilateral monopolistic channel, then extend the analysis to a supply chain with competing manufacturers. We identify the optimal decision timing by comparing equilibrium profits and strategies across games in each supply chain setup. We find that a monopolistic manufacturer always prefers that prices and ME be decided simultaneously. However, this result does not hold when product competition is taken into account. The optimal decision timing for competing manufacturers depends on the retailer's and manufacturers' ME effectiveness levels as well as on competition intensity. Specifically, when ME are not very effective, a simultaneous decision scenario is preferred because it provides the advantage of higher profit margins or sales. However, for highly effective ME, manufacturers prefer to decouple ME and pricing decisions. The retailer's optimal scenario is either to make all decisions simultaneously or to choose prices prior to ME. This means that supply chain firms can face conflict due to the decision timing for prices and ME

Local advertising externalities and cooperation in one manufacturer-two retailers channel

In this paper, we consider a static model for advertising strategies and pricing decisions in supply chain with one monopolistic manufacturer and two duopolistic retailers. We assume an additive form of the consumer demand which is influenced by retail price and advertising. The manufacturer sets the wholesale price, invests in advertising (at national level) and offers cooperative advertising to boost the advertising expenditures of their retailers. The retailers set the retail price and invest in advertising (at local level). By means of game theory, we discuss three different relationships between the supply chain members: two non cooperative games including the Stackelberg – Cournot and the Stackelberg – Collusion and one cooperative game. The comparison between the three models reveals that the advertising, the pricing, the consumer demand and the profits are affected by various relationships. Furthermore, under the cooperation situation, we propose a channel coordination mechanism through a manufacturer’s participation rate in retailers’ local advertising cost and wholesale price by using utility function

Modelling Subsidy as a Cooperative Advertising Channel Coordination Mechanism

This work considers the use of subsidy as channel coordination strategy in vertical cooperative advertising in which the manufacturer is the Stackelberg game leader and the retailer is the follower. While the retailer is directly involved in advertising, the manufacturer is indirectly involved through the provision of subsidy to aid the retailer in advertising the product. The work models the demand function using a multiplicative advertising-price-demand function, and obtains the players’ prices, the retail advertising effort, the manufacturer’s subsidy rate and the payoffs. The work observes that with increasing subsidy, the manufacturer’s price margin increases while that of the retailer reduces and eventual becomes zero with total subsidy. However, the manufacturer should not totally subsidise retail advertising since it would be counterproductive for him, while at the same time would lead to very large retail payoff. Thus with appropriate subsidy strategy, the prices and the payoffs, and eventually the entire channel can be coordinated. Keywords: Channel coordination, Vertical cooperative advertising, Stackelberg game, Advertising price-demand function, Subsidy rate

Game-theoretic analysis of supply chain coordination under advertising and price dependent demand

Supply chain members cannot act independently and they need to act as a part of a unified system and coordinated with other members. Therefore, a coordination mechanism may be necessary to motivate members to achieve coordination. In this paper, the coordination problem is studied in a two-level supply chain consisting of a supplier and a retailer where demand is a function of price and advertising expenditures in two scenarios. The first scenario is “No coordination”, and the other scenario is “coordination with Revenue sharing contract”. The models are solved using game theory, Cooperative and Nash equilibrium. Finally, numerical examples are presented indicating that the average expected profit in the second scenario, coordination with revenue sharing, is higher than the first scenario. In addition numerical examples indicate that as price and advertising elasticity to demand increase, profitability of supply chain decreases

Cooperative Advertising for Competing Manufacturers: The Impact of Long-Term Promotional Effects

Producción CientíficaThe effectiveness of cooperative advertising programs is studied in a market where two competing manufacturers deal with an exclusive retailer and two products. Two twostage game theoretic models are developed to analyze the long-term effects of retailer’s promotions, which can be positive or negative, on the effectiveness of cooperative advertising. Closed-form equilibrium solutions are obtained and compared. We find that the level of product substitutability and the sign and magnitude of the long-term effects of retailer’s promotions on sales determine whether cooperative advertising should be offered and accepted by the manufacturers and retailer. In particular, depending on the level of product substitutability, cooperative advertising can benefit both the manufacturers and retailer even when retailer’s promotions negatively affects future sales. Conversely, it may not be in the interest of the manufacturers to offer cooperative advertising when the products are fairly undifferentiated regardless of the nature of the long-term effects of promotions. Finally, the manufacturers and retailer may refuse to respectively offer or participate in cooperative advertising programs that enhance total channel profits.Research of the first author is supported by the National Sciences and Engineering Council of Canada (NSERC). Grant # 1509. The second author’s research is partially supported by MEC under project ECO2014- 52343-P, co-financed by FEDER funds and the COST Action IS1104 “The EU in the new economic complex geography: models, tools and policy evaluation”

Digital supply chain through dynamic inventory and smart contracts

This paper develops a digital supply chain game, modeling marketing and operation interactions between members. The main novelty of the paper concerns a comparison between static and dynamic solutions of the supply chain game achieved when moving from traditional to digital platforms. Therefore, this study proposes centralized and decentralized versions of the game, comparing their solutions under static and dynamic settings. Moreover, it investigates the decentralized supply chain by evaluating two smart contracts: Revenue sharing and wholesale price contracts. In both cases, the firms use an artificial intelligence system to determine the optimal contract parameters. Numerical and qualitative analyses are used for comparing configurations (centralized, decentralized), settings (static, dynamic), and contract schemes (revenue sharing contract, wholesale price contract). The findings identify the conditions under which smart revenue sharing mechanisms are worth applying

An Integrated Bargaining Solution Analysis For Vertical Cooperative Sales Promotion Campaigns Based On The Win-Win-Win Papakonstantinidis Model

Authors intention was to examine the possibility to investigate win-win-win papakonstantinidis model in order to develop an integrated bargaining solution analysis for vertical cooperative sales promotion campaigns. Based on previous theoretical extensions (Spais and Papakonstantinidis, 2011; Spais, Papakonstantinidis and Papakonstantinidis, 2009), this study presented an integrated bargaining solution analysis for cases of optimal allocation of a promotion budget in a cooperative sales promotion campaign in vertical marketing channels. This integrated bargaining solution analysis included: a) three (3) adjusted utility functions, considering the parameters of sales response budgeting method, the break-even sales analysis and the marketing channel members trade promotion goals; b) the referee solution, the optimal solution for the three players and the constraints; c) the definition of the third win in terms of a continuous sensitization process and perfect information; and d) the presentation of the potential outputs from a bargaining process regarding to the sharing of the cooperative sales promotion cost among A, B and C parties/players for different sales promotion offerings. Encouragingly, the review of the modern literature and the four (4) critical case studies of cooperative marketing programs confirmed the need for a win-win-win approach in cooperative sales promotion planning in vertical marketing channels