Advertising in Asymmetric Competing Supply Chains

Bin Liu, Gangshu Cai, and Andy Tsay. 2014. Advertising in Asymmetric Competing Supply Chains. Production and Operations Management. 23(11), 1845-1858.

68 Pages Posted: 9 Apr 2013 Last revised: 12 Aug 2017

See all articles by Bin Liu

Bin Liu

Henan Agricultural University

Gangshu (George) Cai

Santa Clara University

Andy Tsay

Santa Clara University - Leavey School of Business

Date Written: March 20, 2013

Abstract

Advertising is a crucial tool for demand creation and market expansion. When a manufacturer uses a retailer as a channel for reaching end customers, the advertising strategy takes on an additional dimension: which party will perform the advertising to end customers. Cost sharing (“cooperative advertising”) arrangements proliferate the option by decoupling the execution of the advertising from its funding. We examine the efficacy of cost sharing in a model of two competing manufacturer-retailer supply chains who sell partially substitutable products that may differ in market size. Some counterintuitive findings suggest that the firms performing the advertising would rather bear the costs entirely, if this protects their unit profit margin. We also evaluate the implications of advertising strategy for overall supply chain efficiency and consumer welfare.

Keywords: manufacturer advertising, retailer advertising, cost sharing, supply chain competition, game theory

Suggested Citation

Liu, Bin and Cai, Gangshu (George) and Tsay, Andy, Advertising in Asymmetric Competing Supply Chains (March 20, 2013). Bin Liu, Gangshu Cai, and Andy Tsay. 2014. Advertising in Asymmetric Competing Supply Chains. Production and Operations Management. 23(11), 1845-1858. , Available at SSRN: https://ssrn.com/abstract=2236440

Bin Liu

Henan Agricultural University ( email )

Zhengzhou
China

Gangshu (George) Cai (Contact Author)

Santa Clara University ( email )

500 El Camino Real
Santa Clara, CA CA 95053
United States
4085542785 (Phone)

Andy Tsay

Santa Clara University - Leavey School of Business ( email )

500 El Camino Real
Dept of Info Systems & Analytics (ISA)
Santa Clara, CA California 95053
United States

HOME PAGE: http://www.scu.edu/business/isa/faculty/tsay/

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