EconPapers    
Economics at your fingertips  
 

Channel Coordination with Cooperative Advertising Considering Effect of Advertising on Willingness to Pay

Amir Farshbaf-Geranmayeh (), Masoud Rabbani () and Ata Allah Taleizadeh ()
Additional contact information
Amir Farshbaf-Geranmayeh: University of Tehran
Masoud Rabbani: University of Tehran
Ata Allah Taleizadeh: University of Tehran

Journal of Optimization Theory and Applications, 2018, vol. 176, issue 2, No 13, 509-525

Abstract: Abstract In this paper, cooperative advertising in a manufacturer–retailer supply chain is studied. Advertising can enhance willingness to pay (WTP) of customers. This trade-off between the benefits of increasing WTP of customers and the advertising expenditure is a key to understanding the retailers optimal advertising decision. On the other hand, it is interesting to understand in which condition supporting the retailer for his advertising expenditure is beneficial for the manufacturer. In this study, in order to capture pricing and advertising strategies of the channel member, three non-cooperative games including Nash, Stackelberg retailer and Stackelberg manufacturer game-theoretic models are established. In spite of the related studies which restrict price in order to prevent negative demand, the proposed model allows channel members to increase their prices by enhancing WTP of customers. In this study, contrary to similar additive form demand functions applied in the co-op ad literature which limits their studies for cases that profit function is concave with respect to variables, optimal prices and advertising strategies are obtained for all the solution space. Surprisingly for the very high values of the advertising effect coefficient, a finite optimal advertising expenditure is achieved.

Keywords: Cooperative advertising; Game theory; Advertising effect; Willingness to pay; Pricing; 91A40; 90B60; 91B42; 90C30 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://link.springer.com/10.1007/s10957-018-1217-5 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:joptap:v:176:y:2018:i:2:d:10.1007_s10957-018-1217-5

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10957/PS2

Access Statistics for this article

Journal of Optimization Theory and Applications is currently edited by Franco Giannessi and David G. Hull

More articles in Journal of Optimization Theory and Applications from Springer
Bibliographic data for series maintained by Sonal Shukla ().

 
Page updated 2019-04-09
Handle: RePEc:spr:joptap:v:176:y:2018:i:2:d:10.1007_s10957-018-1217-5