Table of Contents Author Guidelines Submit a Manuscript
Journal of Applied Mathematics
Volume 2013, Article ID 480401, 8 pages
http://dx.doi.org/10.1155/2013/480401
Research Article

Vertical Cooperative Advertising with Substitute Brands

College of Economics & Management, South China Agricultural University, Guangzhou 510642, China

Received 11 July 2013; Accepted 24 August 2013

Academic Editor: X. Henry Wang

Copyright © 2013 You-Hua Chen and Xiao-Wei Wen. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

Cooperative (co-op) advertising is attracting more and more attention. This paper analyzes co-op advertising behavior based on a dual-brand model with a single manufacturer and a single retailer, and some interesting conclusions are achieved. Firstly, the firm in the supply chain advertises both brands, and the difference of advertising expenditure is not very large in equilibrium. Secondly, the retailer's advertising and the manufacturer's participation ratios depend on both the retailer's and the manufacturer's marginal profits. Thirdly, the stimulating effect increases the advertising investment while the competition effect decreases it, but they have no effect on the manufacturer's participation ratio. Fourthly, co-op advertising is more sensitive to the manufacturer's marginal profits than those of the retailer. Lastly, total advertising investment and profit are greater under cooperative decision than under Stackelberg decision.