Coordination through cooperative advertising in a two-period supply chain with retail competition

Purpose Most firms in the fashion industry frequently design and promote new products, which leads to a two-period phenomenon in product sales. This study aims to examine the optimal advertising efforts of each channel member and the subsidy strategies of the manufacturer with retail competition in a two-period supply chain. Design/methodology/approach By utilizing the game theory, this study developed a cooperative advertising model that considers the element of retailer competition in a two-period supply chain. Findings The main results of this study are as follows. An increase in the subsidy rate of one retailer's advertising cost will lead to a decrease in the share of the other. When a manufacturer's marginal profit from one retailer is considerably larger than that from the other, the manufacturer will share more advertising cost with the former. This study demonstrates that a bilateral participation contract can achieve supply chain coordination and increases the likelihood of retailers to participate in this contract when competition effect is small. Originality/value Most previous studies related to cooperative advertising focused on a single-period supply chain. This study investigates cooperative advertising strategy with retail competition in two-period sales and explores the potential coordinating power of a bilateral participation contract.