Document Type : Original Article


Master Student, South Tehran Azad University.


In this research, marketing and pricing decisions of a two-level supply chain consisting of one manufacturer and two competing retailers have been considered.Theinfluences of manufacturer participation in local advertising costs of retailers have beenstudied. Since competition in the supply chain exists, the game theories are used to solve the model. For this purpose, manufacturer acts as Stackelberg leader who specifies wholesale prices for each retailer. Demand is dependent on the price and advertising. In this study, optimal pricing and advertising costs are determined such that maximizes the total profits. Finally, numerical examples are provided.By using the results of numerical example we can conclud that the manufacturerparticipationinlocaladvertising costs of retailers is effective and increases total profits of chain.


1. Aust, G., &Buscher, U. (2012). Vertical cooperative advertising and pricing decisions in a manufacturer–retailer supply chain: A game-theoretic approach. European Journal of Operational Research, 223(2), 473-482.
2. Bergen, M., & John, G. (1997). Understanding cooperative advertising participation rates in conventional channels. Journal of Marketing Research, 357-369.
3. Chen, T.H., (2011).Coordinating the ordering and advertising policies for a single-period commodity in a two-level supply chain.Comput.Ind. Eng. 61, 1268–1274.
4. Fugate, B., Sahin, F., &Mentzer, J. T. (2006). Supply chain management coordination mechanisms. Journal of Business Logistics, 27(2), 129-161.
5. He, X., Prasad, A., &Sethi, S. P. (2009). Cooperative advertising and pricing in a dynamic stochastic supply chain: feedback Stackelberg strategies. Production and Operations Management, 18(1), 78-94.
6. He, X., Krishnamoorthy, A., Prasad, A., Sethi, S.P.,(2011).Retail competition and cooperative advertising.Oper. Res. Lett. 39, 11–16.
7. Huang, Z., & Li, S. X. (2001). Co-op advertising models in manufacturer–retailer supply chains: A game theory approach. European Journal of Operational Research, 135(3), 527-544.
8. Huang, Z., Li, S. X., & Mahajan, V. (2002).An Analysis of Manufacturer‐Retailer Supply Chain Coordination in Cooperative Advertising*. Decision Sciences,33(3), 469-494.
9. Jørgensen, S., Sigue, S., Zaccour, G. (2001).Stackelberg leadership in a marketingchannel.International Game Theory Review 3 (1), 13–26.
10. Jørgensen, S., &Zaccour, G. (2003a). Channel coordination over time: incentive equilibria and credibility. Journal of Economic Dynamics and Control, 27(5), 801-822.
11.  Kreps, D.,Paul MilgromJohn RobertsRobert Wilson(1982).Rational cooperation in the finitely repeated prisoners' dilemma.Journal of Economic Theory.27 , 245–252
12. Kunter, M. (2012).Coordination via cost and revenue sharing in manufacturer–retailer channels. European Journal of Operational Research, 216(2), 477-486.
13. Li, S.X., Huang, Z., Zhu, J., & Chau, P. Y. (2002). Cooperative advertising, game theory and manufacturer–retailer supply chains. Omega, 30(5), 347-357.
14. Mokhlesian, M &Zegordi, S, H.(2014).Application ofmultidivisional bi-level programming to coordinate pricing and inventory decisions in a multiproduct competitive supply chain.Int J AdvManufTechnol, 71,1975–1989.
15. Mokhlesian, M. Zegordi, S, H. Nakhai Kamal Abadi, I., Albadvi, A.(2015). Pricing decisions in a two-echelon decentralized supply chain using bi-level programming approach. Journal of Industrial and Systems Engineering, 8(1), 106 – 124.
16. Roy, A. Sana, S, S.& Chaudhuri, K., (2014).Effect of cooperative advertising policy for two layer supply chain.International Journal of Management Science and Engineering Management, 10(2), 48-62.
17. Sana, S, S. (2013). Optimal contract strategies for two stage supply chain. Economic Modelling 30, 253–260.
18. SeyedEsfahani, M. M., Biazaran, M., &Gharakhani, M. (2011).A game theoretic approach to coordinate pricing and vertical co-op advertising in manufacturer–retailer supply chains. European Journal of Operational Research,211(2), 263-273.
19. Somers, T. M., Gupta, Y. P., &Herriott, S. R. (1990). Analysis of cooperative advertising expenditures: A transfer-function modeling approach. Journal of Advertising Research, 30(5), 35-49.
20. Szmerekovsky, J. G., & Zhang, J. (2009).Pricing and two-tier advertising with one manufacturer and one retailer. European Journal of Operational Research,192(3), 904-917.
21. Wang, S. D., Zhou, Y. W., Min, J., &Zhong, Y. G. (2011). Coordination of cooperative advertising models in a one-manufacturer two-retailer supply chain system. Computers & Industrial Engineering,61(4), 1053-1071.
22. Xie, J., &Neyret, A. (2009). Co-op advertising and pricing models in manufacturer–retailer supply chains. Computers & Industrial Engineering,56(4), 1375-1385.
23. Xie, J., & Wei, J. C. (2009). Coordinating advertising and pricing in a manufacturer–retailer channel.European Journal of Operational Research,197(2), 785-791.
24. Yue, J., Austin, J., Wang, M. C., & Huang, Z. (2006).Coordination of cooperative advertising in a two-level supply chain when manufacturer offers discount. European Journal of Operational Research,168(1), 65-85.
25. Zhang, J., Gou, Q., Liang, L., Huang, Z. (2013). Supply chain coordination through cooperative advertising with reference price effect. Omega, 41, 345–353.