Joint promotion of cross-market retailers: models and analysis

Abstract

To seek more business opportunities, cross-market retailers pursue horizontal joint promotion (HJP) to promote their products together. It is important to determine the factors that make cross-market retailers pursue HJP and how HJP affects the retailers' optimal decisions. We address such issues in the context of a shopping mall in which two cross-market retailers pursue HJP with the possible involvement of the shopping mall. We develop game-theoretic models to study whether the shopping mall should provide consumers with coupons that they can obtain from the retailer in the source market and consume at the retailer in the target market. We find that when coupons are offered to consumers, the retailer in the source market has a higher price and will pay more for HJP, but has a smaller demand and a lower profit than the retailer in the target market. Furthermore, when the effect of the coupon is relatively large, both retailers prefer the coupon as they can have higher prices, demands, and profits, and their promotional strategies change with the denomination and effect of the coupon. Conversely, both retailers would reduce investments in HJP because the coupon may bring them lower profits.

Keywords:

• Retailing
• joint promotion
• cross market
• game theory
• coupon

Acknowledgments

We are grateful to the editors and two anonymous reviewers for their valuable comments on joint promotion of cross market retailers. This research was supported by the National Natural Science Foundation of China (NSFC) under grant number 71831001 and Beijing Logistics Informatics Research Base.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This work was supported by National Natural Science Foundation of China [71831001].

Notes on contributors

Ke Yan

Dr Ke Yan is currently studying for a doctorate in School of Economics and Management, Beijing Jiaotong University, as well as holds the bachelor degree in engineering and the master degree in management. He mainly studies the optimal operation decisions of supply chain under cross-market cooperation and smart logistic.

Guowei Hua

Dr Guowei Hua is now a Professor and associate dean of School of Economics and Management, Beijing Jiaotong University. His expertise focuses on the problems of supply chain management, facility location and operations management. He is in charge of a major project of National Natural Science Foundation of China and gains the 2020 highly cited Chinese researchers of Elsevier. He has published more than 50 articles on leading international journals.

T.C.E. Cheng

Professor T.C.E. Cheng is now a Professor in Department of Logistics and Maritime Studies, The Hong Kong Polytechnic University and the dean in Faculty of Business. His research covers a wide range of subjects, including the industrial and business applications of microcomputers, modelling and simulation of manufacturing systems, application of maximum entropy principle in reliability study and stochastic modelling and analysis of production and distribution systems etc. In 2020, the number of citations was 21,335 (excluding self-citations: 19,913) according to the ISI Web of Science.

Shouyang Wang

Professor Shouyang Wang is currently a chair professor of Academy of Mathematics and Systems Science, Chinese Academy of Sciences. He is a fellow of The Third World Academy of Sciences, an academecian of International Academy of Systems and Cybernetics Sciences, and a fellow of Asian Pacific Industrial Engineering and Management. His research areas include decision analysis, conflict analysis, operations management, and supply chain management. He has published over 400 articles in leading journals and more than 40 monographs.

Jing-Xin Dong

Professor Jingxin Dong holds a PhD degree in System Engineering, Master and bachelor degrees in transport engineering. He is now a Professor in Operations Management and Supply Chain Management at Business School, Newcastle University, UK. His expertise is to apply mathematics and information technology to improve the efficiency of operation and supply chain management. He has developed a few software packages to facilitate decision making in these fields. He has published some 80 articles on leading international journals and conferences.