Cooperative advertising in a dual-channel supply chain with a fairness concern of the manufacturer

With the rapid development of e-commerce, increasing numbers of manufacturers have decided to open a direct channel and directly participate in the market. This paper considers a dyadic supply chain consisting of a manufacturer and a traditional retailer, in which the the manufacturer employs a direct channel, and the manufacturer and the retailer adopt a cooperative advertising strategy to boost sales. In addition, the effect of a fairness concern of the manufacturer is investigated. We find that (1) irrespective of whether the manufacturer has a fairness concern, channel coordination can never be achieved. (2) When the profit of the manufacturer and that of the entire channel increase, the retailer's profit will be reduced, but the retailer's profit remains larger than that under the non-cooperative scenario. (3) An appropriate advertising effort mark-up can achieve both supply chain coordination and a win-win outcome for each channel. Furthermore, we expand the model to a competitive case with a single manufacturer and two independent retailers. We find that the impact of the manufacturer's fairness concern on the retailers' profit is related to the range of the marketing share rate of the two retailers.