Article ID: | iaor20032339 |
Country: | United States |
Volume: | 33 |
Issue: | 3 |
Start Page Number: | 469 |
End Page Number: | 494 |
Publication Date: | Jul 2002 |
Journal: | Decision Sciences |
Authors: | Mahajan Vijay, Li Susan X., Huang Zhimin |
Keywords: | game theory |
In the literature of cooperative (co-op) advertising, the focus of the research is on a relationship in which a manufacturer is the leader and retailers are followers. This relationship implies the dominance of the manufacturer over retailers. Recent market trends have shown a shift in power from manufacturers to retailers. Retailers, as a result, may now possess equal or even greater power than a manufacturer in some instances when it comes to retailing. Based on this new market phenomenon, we intend to explore the role of co-op advertising in a manufacture–retailer supply chain through brand name investments, local advertising expenditures, and sharing rules of advertising expenses. Two co-op advertising models are developed and compared. The first co-op advertising model is based on the traditional leader–follower relationship of a manufacturer and retailer. The second model incorporates partnership into co-op advertising coordination. Business examples and managerial implications of the models have been discussed. A cooperative bargaining technique is utilized to implement the partnership co-op advertising model.