Modelling pricing, vertical co-op advertising and quality improvement in a non-cooperative three-echelon supply chain using game theory approach

Extending services and operations of organizations in the field of e-business or e-government sometimes requires the integration of business applications. However, sometimes due to challenges and risks, such as complex business processes reengineering, upstream organizations are reluctant to integrate their applications. This paper focuses on two critical questions; (1) How can organizations be encouraged to participate in integrating their business applications? (2) What is the amount of incentives required? In this study, cooperative game theory and the externalities of these systems have been considered to form a stable coalition between organizations for integrating their business applications. We provided an algorithm for determining the incentives to integrate the business applications with other organizations in this coalition. These incentives can be extended to various management issues for better decision-making such as economic aspects, public subsidies, and public participation. The results of experiments have shown that creating a coalition based on this strategy is always possible, and the benefits of organizations in the coalition rise with increasing service delivery in business applications.

Section: Perfect Examplementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

An incentive mechanism for integration of business applications between organizations

Esmaeilyfard

Salehi

2023

“…The second relevant research area is cooperative advertising. Cooperative advertising has been extensively investigated in the supply chain literature from a multitude of perspectives, including the design and profit impact of the program [6,22], competition [28,29], joint pricing and advertising decisions [2], dynamic effects of national or local advertising [25], price and quality decisions in a three-echelon supply chain [40], and the impact of power relationships [13,39]. Aust and Buscher [3] and Jørgensen and Zaccour [24] review the related literature.…”

Section: Literature Reviewmentioning

confidence: 99%

Effects of consumer loyalty and product web compatibility on cooperative advertising and pricing policies in a dual-channel supply chain

Chaab

Demirag

2022

A common practice for brand manufacturers is to operate dual distribution channels in which they offer an online channel for direct sales to end consumers and an independently-managed retail channel for sales in physical stores. This structure enables the manufacturers to reach multiple segments of consumers with different online and offline shopping preferences, but it may create channel conflicts due to the manufacturers' competitive position in the end market. Cooperative advertising programs can be implemented in response to the emerging competitive dynamics between the manufacturers and the retailers. We investigate the impact of the consumers' sales channel preference (i.e., "consumer loyalty") and the product compatibility with online shopping (i.e., "product web compatibility/fit") on the cooperative advertising and pricing decisions of a manufacturer and a retailer in a dual-channel supply chain. We use game-theoretical models and characterize the firms' equilibrium behaviors under different power structures in the channel. Our results indicate that the level of the retailer's advertising investment and the manufacturer's reimbursement in the cooperative advertising program depend critically on consumer loyalty, product web compatibility, and the power distribution among the channel members. For example, when the channel power is symmetrically distributed or held asymmetrically by the retailer, the retailer's local advertising level increases as the product web compatibility decreases or the proportion of store-loyal consumers increases; whereas this trend is reversed when the manufacturer is the channel leader. We examine how the introduction of the direct channel affects the profits, and we generate additional managerial insights from numerical experiments.

“…Ma et al [24] study how diverse channel power affects the dynamic game characteristics of a dual-channel supply chain. Shoeleh et al [29] consider five different channel structures to display how the quantity decision and advertising decision influence the performance of the supply chain Seyedesfahani et al [28] analyze various scenarios of advertising decision including retailer-led manufacturer-led and Nash game to explore how channel power affect the optimal choice of players Similarly Chaab and Rasti-Barzoki [8] taking the cooperative advertising program into consideration explore how the equilibrium solutions vary with different game structures Some studies also discuss how the quantity decision sequence affects the players' choice For example Zhang et al [40] compare the retailer-led quantity decision and the manufacturer-led quantity decision pointing out that the manufacturer has no incentive to make quantity decision firstly Ha et al [13] analyze the impact of encroachment on quality decisions under two channel powers ie., the sequential quantity decision and simultaneous quantity decision showing that the manufacturer is more likely to encroach if they make simultaneous quantity decision However it is not known how quantity decision sequence affects the advertising decision and the manufacturer encroachment Furthermore, coordination is useful to improve the profits of the supply chain further. Notice that the cost sharing mechanism is adopted in various situations to coordinate the supply chain.…”

Section: Literature Reviewmentioning

confidence: 99%

Research on manufacturer encroachment with advertising and design of incentive advertising: A game-theoretic approach

Hong

2021

This paper studies the advertising decision regarding a supply chain with manufacturer encroachment. It is assumed that the manufacturer and the retailer have different quantity decision power so as to explore how the first-mover advantage affect the advertising decision and the manufacturer encroachment. It is known that the manufacturer encroachment usually makes the retailer worse off. Our results show that (1) the retailer can benefit from encroachment when the manufacturer’s direct selling cost is high and the manufacturer does not have first-mover advantage of quantity decision; (2) the manufacturer can benefit from encroachment if his advertising effectiveness is high; (3) the encroachment may lead to a lose-lose result if the manufacturer has the first-mover advantage and his advertising effectiveness is not relative high; (4) the manufacturer may be worse off if his direct selling cost is intermediate no matter who has the first-mover advantage of quantity decision. Thus, the manufacturer should be more careful about the relationship between him and the retailer. Additionally, we consider two ways of advertising cooperation. Results shows that which type of cooperation is better depends on the relative advertising effectiveness. Furthermore, we propose an incentive cooperative advertising scheme which makes all players get higher profits.