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Mathematical Problems in Engineering
Volume 2013 (2013), Article ID 607184, 16 pages
Research Article

Cooperative Advertising in a Supply Chain with Horizontal Competition

1School of Management, University of Science and Technology of China, Hefei, Anhui 230026, China
2Sheldon B Lubar School of Business, University of Wisconsin-Milwaukee, Milwaukee, WI 53201-0413, USA

Received 27 April 2013; Accepted 20 May 2013

Academic Editor: Tsan-Ming Choi

Copyright © 2013 Yi He et al. 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.


Cooperative advertising programs are usually provided by manufacturers to stimulate retailers investing more in local advertising to increase the sales of their products or services. While previous literature on cooperative advertising mainly focuses on a “single-manufacturer single-retailer” framework, the decision-making framework with “multiple-manufacturer single-retailer” becomes more realistic because of the increasing power of retailers as well as the increased competition among the manufacturers. In view of this, in this paper we investigate the cooperative advertising program in a “two-manufacturer single-retailer” supply chain in three different scenarios; that is, (i) each channel member makes decisions independently; (ii) the retailer is vertically integrated with one manufacturer; (iii) two manufacturers are horizontally integrated. Utilizing differential game theory, the open-loop equilibrium-advertising strategies of each channel member are obtained and compared. Also, we investigate the effects of competitive intensity on the firm’s profit in three different scenarios by using the numerical analysis.