Coordination and cooperation in manufacturer - Retailer supply chains

In this paper, we explore the role of vertical cooperative (co-op) advertising efficiency of transactions between a manufacturer and a retailer. We address the impact of brand name investments, local advertising, and sharing policy on co-op advertising programs. Game theory concepts form the foundation for the analysis. We begin with the classical co-op advertising model where the manufacturer, as the leader, first specifies its strategy. The retailer, as the follower, then decides on its decision. We then relax the assumption of retailer's inability to influence the manufacturer's decisions and discuss full coordination between the manufacturer and the retailer on co-op advertising. Two alternative bargaining models are employed to select the best co-op advertising scheme for achieving full coordination.