Co-op Advertising Models Under National Vs. Private Brand Competition And Direct Vs. Indirect Channel Competition

Recently, the research on retailer's private brand has become one of the hottest topics. At the same time, grand to the popularization of internet, more and more manufacturers explore the application of e-channel as a direct channel to sell their products. Consider both of the two challenges, co-op advertising policy become more complicated and misapprehensive. For the practical management, this paper tries to build a conceptual model for a supply chain composed by a manufacturer, who explores a direct channel, and a retailer, who own her private brand. Under this model, five games have been analyzed: Stackelberg game lead by the manufacturer, Stackelberg game lead by the retailer, Nash game where the allowance rate is decided by the manufacturer, Nash game where the allowance rate is decided by the retailer and the game where the allowance rate is exogenous given by contract. By the comparison of the profit function among the games, we obtain: a) the leader of the game maximizes his profit under Stackelberg game; b) the decision power of the allowance rate is critical when the negotiation power of players are close and the marginal revenue of advertisement of one player is not more than twice of the other; c) The exogenous unilateral allowance rate contract is a compromise policy which get the biggest profit of the system, compared to other games.Also, by a little model expansion, this paper discussed the influence on the supply chain when the retailer introduces the private brand and the manufacturer explores the direct channel. By the end, the bilateral participation on the exogenous allowance rate is proved to be a coordination contract of the supply chain.