COORDINATION OF COOPRATIVE ADVERTISING MODELS IN SUPPLY CHAIN WHEN MANUFACTURER OFFERS TRADE-CREDIT

This paper considers the issue of cooperative (co-op) advertisement in a manufacturer-retailer supply chain, in which the manufacturer offers complete/partial trade credit (T-C) to the retailer, and the retailer may be capital constrained. Three game structures, namely, Nash game, Stackelberg game and Partnership game, are used to discuss four different models: complete T-C with capital adequate retailer, complete T-C with capital constrained retailer, partial T-C with capital adequate retailer, and partial T-C with capital constrained retailer. We present the optimal brand investment, and local advertising expense associated with the decision of the manufacturer on T-C type and the condition of initial fund of retailer. By comparing the optimal co-op advertising decision without T-C, we show that the higher the ratio of manufacturer willing to offer T-C is, the higher both the retailer and the manufacturer spend on local advertising and brand investment in the Nash equilibrium and the Stackelberg equilibrium for the four models, except the local advertising investment of the retailer in the Nash equilibrium when the retailer has sufficient capital. We show that the combination of T-C and co-op advertising policy is more effective in coordinating the supply chain.