Cooperative Advertising and Ordering Policy in Supply Chain with a Risk-Neutral Manufacturer and a Loss-Averse Retailer

Deviant behavior often exists in enterprise operations. This paper considers cooperative advertising and ordering policy in supply chain with a risk-neutral manufacturer and a loss-averse retailer. Without loss of generality, take the manufacturer as leader and the retailer as follower, and compare with the situation when the retailer is risk-neutral. The results shows that under certain conditions, loss-averse retailer's optimal order quantity and the optimal local advertising expenditure is less than the risk-neutral retailer's optimal decision, and increase with the degree of loss aversion. And manufacturer's optimal national ad expenditure increases with the degree of loss aversion, while the optimal ad-sharing ratio first increases and then decreases with the increasing of degree of loss aversion. This paper also gives a numerical example to analyze the effects of each parameter on optimal decisions.