Issue |
RAIRO-Oper. Res.
Volume 56, Number 3, May-June 2022
|
|
---|---|---|
Page(s) | 1655 - 1684 | |
DOI | https://doi.org/10.1051/ro/2022081 | |
Published online | 30 June 2022 |
How cooperative advertising interacts with distributional contracts in a dual-channel system
School of Management, University of Science and Technology of China, Hefei 230026, P.R. China
* Corresponding author: signji@mail.ustc.edu.cn
Received:
11
February
2022
Accepted:
18
May
2022
With the development of E-commerce, an increasing number of online platforms are conducting advertising campaigns to expand their sales. In some situations, the manufacturer is willing to share the advertising cost, while in others it is not. Additionally, recently, many online platforms have started choosing an agency contract, instead of a wholesale contract, to obtain a predetermined proportion of revenue from the manufacturer to make profits. This paper studies a scenario of a manufacturer selling through both a direct channel and a platform channel to investigate the interaction between a manufacturer’s cooperative advertising strategy and a platform’s distribution contract choice. We develop a stylized model based on game theory to drive the optimal prices and advertising level under different contracts. By using a representative consumer function, we drive the following interesting results. Firstly, under the wholesale contract, a manufacturer prefers cooperating only when the cost-sharing rate is small, but under an agency contract, when the revenue-sharing rate is large, the manufacturer will not choose to cooperate even if the cost-sharing rate is low. Secondly, the platform’s profit does not always increase in the revenue-sharing rate. Finally, under some conditions, the platform would prefer that the manufacturer not share the cost. Specifically, when the competition intensity is small and the revenue-share rate is high, the platform would rather choose an agency contract to cover all advertising costs on its own than a wholesale contract where the manufacturer is willing to share advertising costs. We also consider direct channel advertising as well in an extension, and the qualitative results still hold.
Mathematics Subject Classification: 90B06 / 90B60 / 91A99 / 91B24
Key words: Cooperative advertising / supply chain contract / agency model / game theory
© The authors. Published by EDP Sciences, ROADEF, SMAI 2022
This is an Open Access article distributed under the terms of the Creative Commons Attribution License (https://creativecommons.org/licenses/by/4.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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