Coordinating advertising and pricing in a manufacturer-retailer channel
TL;DR: This paper addresses channel coordination by seeking optimal cooperative advertising strategies and equilibrium pricing in a two-member distribution channel and identifies the feasible solutions to a bargaining problem where the channel members can determine how to divide the extra profits.
About: This article is published in European Journal of Operational Research.The article was published on 2009-09-01. It has received 288 citations till now. The article focuses on the topics: Channel coordination & Non-cooperative game.
Citations
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TL;DR: A comprehensive survey of commonly used demand models which depend on price, rebate, lead time, space, quality, and quality, as well as game theoretic multifirm models involving strategic interaction among the firms.
Abstract: A variety of mathematical forms have been developed to characterize demand functions which depend on a firm's operational and marketing activities. Such demand functions are being increasingly used by researchers in economics and different functional areas of business. We provide a comprehensive survey of commonly used demand models which depend on (i) price, (ii) rebate, (iii) lead time, (iv) space, (v) quality, and (vi) advertising. Our survey includes single firm–demand models in each category, as well as game theoretic multifirm models involving strategic interaction among the firms. We observe that certain types of functional forms, such as linear, power/iso-elastic, multinomial logit, and multiplicative competitive interaction, have been widely used to construct various demand models in all six categories, but that a large majority of publications deal with categories (i) and (v) of demand models. For each of the six categories, we survey relevant functional forms in the representative papers, and discuss the main properties, the advantages, the disadvantages, and comment on possible future research directions. We also present discussions of the applications of these analytical demand models in empirical studies. The article ends with a summary of our major findings.
263 citations
TL;DR: The paper surveys the literature on cooperative advertising in marketing channels (supply chains) using game theoretic methods and finds that this literature has expanded considerably and has studied static as well as dynamic settings.
220 citations
Cites background or methods from "Coordinating advertising and pricin..."
...In the latter, the advertising part is as in, e.g., Xie and Wei (2009)....
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...…the joint maximization solution than in the noncooperative games [Huang and Li (2001), Huang et al. (2002), Li et al. (2002), Xie and Neyret (2009), Xie and Wei (2009), SeyedEsfahani et al. (2011), Aust and Buscher (2012), Yan (2010)].6 Result 3 Retail price is lower in the joint maximization…...
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...Unlike Xie and Neyret (2009), Xie and Wei (2009), the price term is separated and demand is linear in price....
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...…solution The following principles were used to share the joint payoff: Nash bargaining model [Huang and Li (2001), Xie and Neyret (2009), Xie and Wei (2009), SeyedEsfahani et al. (2011)), Yan (2010)]; Eliashberg’s bargaining scheme [Huang et al. (2002), Yue et al. (2009)]; asymmetric…...
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...(iv) Demand in Xie and Wei (2009) is a special case of the demand in SeyedEsfahani et al. (2011) (set υ = 1)....
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TL;DR: In this article, a Stackelberg game model is used to investigate the optimal decisions of local advertising, used-product collection and pricing in centralized and decentralized closed-loop supply chains.
215 citations
TL;DR: This paper considers vertical co-op advertising along with pricing decisions in a supply chain where demand is influenced by both price and advertisement and the feasibility of bargaining game is discussed in a bid to determine a scheme to share the extra joint profit.
198 citations
TL;DR: In this article, a revenue sharing mechanism for centralized and decentralized dual-channel closed-loop supply chains was developed by taking the relationship between the recycle rate and the recycle revenue sharing ratio into consideration.
186 citations
References
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Book•
01 Jan 1988
TL;DR: The Theory of Industrial Organization as discussed by the authors is the first primary text to treat the new industrial organization at the advanced-undergraduate and graduate level Rigorously analytical and filled with exercises coded to indicate level of difficulty, it provides a unified and modern treatment of the field with accessible models that are simplified to highlight robust economic ideas.
Abstract: The Theory of Industrial Organization is the first primary text to treat the new industrial organization at the advanced-undergraduate and graduate level Rigorously analytical and filled with exercises coded to indicate level of difficulty, it provides a unified and modern treatment of the field with accessible models that are simplified to highlight robust economic ideas while working at an intuitive level To aid students at different levels, each chapter is divided into a main text and supplementary section containing more advanced material Each chapter opens with elementary models and builds on this base to incorporate current research in a coherent synthesis Tirole begins with a background discussion of the theory of the firm In part I he develops the modern theory of monopoly, addressing single product and multi product pricing, static and intertemporal price discrimination, quality choice, reputation, and vertical restraints In part II, Tirole takes up strategic interaction between firms, starting with a novel treatment of the Bertrand-Cournot interdependent pricing problem He studies how capacity constraints, repeated interaction, product positioning, advertising, and asymmetric information affect competition or tacit collusion He then develops topics having to do with long term competition, including barriers to entry, contestability, exit, and research and development He concludes with a "game theory user's manual" and a section of review exercises
9,777 citations
"Coordinating advertising and pricin..." refers background in this paper
...It is well documented in marketing and economics literature that uncoordinated decisions lead to ‘‘double marginalization”, which is one of the causes of channel inefficiency (Spengler, 1950; Tirole, 1989; Gerstner and Hess, 1995)....
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TL;DR: In this paper, a new treatment is presented of a classical economic problem, one which occurs in many forms, as bargaining, bilateral monopoly, etc It may also be regarded as a nonzero-sum two-person game in which a few general assumptions are made concerning the behavior of a single individual and of a group of two individuals in certain economic environments.
Abstract: A new treatment is presented of a classical economic problem, one which occurs in many forms, as bargaining, bilateral monopoly, etc It may also be regarded as a nonzero-sum two-person game In this treatment a few general assumptions are made concerning the behavior of a single individual and of a group of two individuals in certain economic environments From these, the solution (in the sense of this paper) of classical problem may be obtained In the terms of game theory, values are found for the game См также: Two-person cooperative games, автор - Джо Нэш
7,600 citations
TL;DR: In this paper, it is shown that under four axioms that describe the behavior of players, there is a unique solution to the two-player bargaining problem, which is different from those suggested by Nash.
Abstract: A two-person bargaining problem is considered. It is shown that under four axioms that describe the behavior of players there is a unique solution to such a problem. The axioms and the solution presented are different from those suggested by Nash. Also, families of solutions which satisfy a more limited set of axioms and which are continuous are discussed. WE CONSIDER a two-person bargaining problem mathematically formulated as follows. To every two-person game we associate a pair (a, S), where a is a point in the plane and S is a subset of the plane. The pair (a, S) has the following intuitive interpretation: a = (a1, a2) where ai is the level of utility that player i receives if the two players do not cooperate with each other. Every point x = (x1, x2) e S represents levels of utility for players 1 and 2 that can be reached by an outcome of the game which is feasible for the two players when they do cooperate. We are interested in finding an outcome in S which will be agreeable to both players. This problem was considered by Nash [3] and his classical result was that under certain axioms there is a unique solution. However, one of his axioms of independence of irrelevant alternatives came under criticism (see [2, p. 128]). In this paper we suggest an alternative axiom which leads to another unique solution. Also, it was called to our attention by the referee that experiments conducted by H. W. Crott [1] led to the solution implied by our axioms rather than to Nash's solution. We also consider the class of continuous solutions which are required to satisfy only the axioms of Nash which are usually accepted. We give examples of families of such solutions.
1,709 citations
"Coordinating advertising and pricin..." refers background in this paper
...Other interesting and less ‘‘traditional” models are available (Eliashberg, 1986; Kalai and Smordinsky, 1975) and might give some new solutions....
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TL;DR: In this article, the authors show that the United States Supreme Court is mistaken in its implied assumption respecting the influence of integration upon competition and that vertical integration may not, as such, serve to reduce competition and may, if the economy is already ridden by deviations from competition, operate to intensify competition.
Abstract: RECENT decisions suggest that the United States Supreme Court is beginning to look upon integration as illegal per se, under the antitrust laws. It may be presumed, in so far as this inference is valid, that the Court believes that integration necessarily reduces competition "unreasonably."2 No sharp distinction is made by the Court between vertical and horizontal integration. It is the purpose of this note to show that the Court is mistaken in its implied assumption respecting the influence of integration upon competition. Horizontal integration may, and frequently does, make for higher prices and a less satisfactory allocation of resources than does pure or workable competition. Vertical integration, on the contrary, does not, as such, serve to reduce competition and may, if the economy is already ridden by deviations from competition, operate to intensify competition. My argument will be confined largely to this last proposition.
1,562 citations
"Coordinating advertising and pricin..." refers background in this paper
...It is well documented in marketing and economics literature that uncoordinated decisions lead to ‘‘double marginalization”, which is one of the causes of channel inefficiency (Spengler, 1950; Tirole, 1989; Gerstner and Hess, 1995)....
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TL;DR: In this paper, the Dorfman-Steiner model is extended to the situation in which present advertising expenditures affect the future demand for the product, and the model is used to predict future demand.
Abstract: The Dorfman-Steiner model [#53] is extended to coyer the situation in which present advertising expenditures affect the future demand for the product.
1,127 citations
"Coordinating advertising and pricin..." refers background in this paper
...Dynamic game theoretic models are typically based on a goodwill function associated with the brand image that is influenced through national and local advertising efforts (Nerlove and Arrow, 1962; Chintagunta and Jain, 1992; Jorgensen et al., 2000; Jorgensen et al., 2003)....
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