Optimal Advertising and Pricing in a Dynamic Durable Goods Supply Chain

Anshuman Chutani () and Suresh Sethi
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Anshuman Chutani: Binghamton University, State University of New York

Journal of Optimization Theory and Applications, 2012, vol. 154, issue 2, No 15, 615-643

Abstract: Abstract Cooperative advertising is an incentive offered by a manufacturer to influence retailers’ promotional decisions. We study a dynamic durable goods duopoly with a manufacturer and two independent and competing retailers. The manufacturer, as a Stackelberg leader, announces his wholesale prices and his shares of retailers’ advertising costs, and the retailers in response play a Nash differential game in choosing their optimal retail prices and advertising efforts over time. We obtain the feedback equilibrium policies for the manufacturer and the retailers in explicit form for a linear demand formulation. We investigate issues, like channel coordination and antidiscriminatory legislation, and also study a case, when the manufacturer sells through only one retailer and the second retailer sells a competing brand.

Keywords: Cooperative advertising; Stackelberg differential game; Nash differential game; Sales–advertising dynamics; Feedback Stackelberg equilibrium; Durable goods (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (25)

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DOI: 10.1007/s10957-012-0034-5

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