Differential game model of cooperative advertising in a supply chain with deteriorating items, competing retailers and reference price effects

ABSTRACT

The phenomenon of cooperative advertising in the market has always been widespread. Considering a supply chain consisting of one manufacturer and multiple retailers with competitive relationships, we explore advertising strategies for deteriorating items when market demand is affected by reference price. By establishing a differential game model, the equilibrium advertising strategies and supply chain profits under different situations are analysed from a long-term and dynamic perspective under decentralised and centralised control, and the trajectories of goodwill and reference prices over time are presented. The conclusions derived provide implications for managers to design optimal advertising strategies.

KEYWORDS:

• Goodwill
• reference price
• competition
• cooperative advertising
• differential game

Acknowledgments

This research was partially supported by Chinese National Funding of Social Sciences (No.19BGL229), and partially supported by National Science Foundation of China (No.71671033).

Disclosure of potential conflicts of interest

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

Additional information

Funding

This work was supported by the Chinese National Funding of Social Sciences [No.19BGL229]; National Natural Science Foundation of China [No.71671033].