Supply chain performance for deteriorating items with cooperative advertising

Article

Abstract

To study the effect of cooperative advertising on the supply chain of deteriorating items, this paper establishes a Stackelberg game model for a two-echelon deteriorating items supply chain composed of one manufacturer and one retailer under a given support program with an exogenous participation rate. The manufacturer as the leader determines the wholesale price and production rate, and the retailer as the follower determines the retail price and advertising strategies. The strategies of the players under the decentralized scenario and the centralized scenario are respectively characterized. Numerical simulations and sensitivity analysis are conducted to gain some managerial insights. It is shown that the pricing, advertising and production strategies are negatively correlated to deteriorating coefficient, and both the profit and the channel efficiency decrease with deteriorating coefficient; The interaction between price, advertising investment and production rate results in a higher retail price of the centralized channel compared to that of the decentralized channel; Implementing the cooperative advertising program does improve the performance of the supply chain in some cases and the participation rate roughly at 0.5 is most preferable, but it is also possible to distort incentive and damage the channel performance when the participation rate reaches a relatively high level.

Keywords

Deteriorating items cooperative advertising supply chain performance differential game 

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Notes

Acknowledgments

The authors thank the editors and two anonymous referees for their helpful comments and suggestions that substantially improved this paper. This work was supported by the National Nature Science Foundation of China No. 61473204, Humanity and Social Science Youth Foundation of Ministry of Education of China No. 14YJCZH204, and the Program for New Century Excellent Talents in Universities of China No. NCET-11-0377.

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Copyright information

© Systems Engineering Society of China and Springer-Verlag Berlin Heidelberg 2017

Authors and Affiliations

  1. 1.College of Management and EconomicsTianjin UniversityTianjinChina

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