Pricing and two-tier advertising with one manufacturer and one retailer

Joseph G. Szmerekovsky and Jiang Zhang

European Journal of Operational Research, 2009, vol. 192, issue 3, 904-917

Abstract: This paper considers the pricing decisions and two-tier advertising levels between one manufacturer and one retailer where customer demand depends on the retail price and advertisement by a manufacturer and a retailer. We solve a Stackelberg game with the manufacturer as the leader and the retailer as the follower. With price sensitive customer demand and a linear wholesale contract, we obtain the optimal decisions by the manufacturer and the optimal responses by the retailer. Our results show that cost sharing of local advertising does not work well, it is better for the manufacturer to advertise nationally and offer the retailer a lower wholesale price.

Keywords: Two-tier; advertising; Pricing; decisions; Stackelberg; game; Manufacturer-retailer; supply; chain (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (39)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:192:y:2009:i:3:p:904-917

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