Channel coordination with quantity discounts and/or cooperative advertising

Karray, Salma; Surti, Chirag

doi:10.1080/00207543.2016.1173253

Cited by 23 publications

(6 citation statements)

References 47 publications

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“…Therefore, the trade credit terms should be based on the retailer's initial payment, order quantity and the level of promotional efforts that the retailer commits to perform in sale period. Since the decisions of a firm on financial, operational and marketing strategies are usually decided by different departments within an organisation (Karray and Surti 2016), our results suggest that the managers should integrate information flows between these departments in making decisions.…”

Section: Discussionmentioning

confidence: 90%

Supply chain coordination under trade credit and retailer effort

Phan

Lai

2019

International Journal of Production Research

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In this paper, we study the role of trade credit in coordinating a Capital Constrained Supply Chain in the presence of retailer Effort (CCSCE), essentially because of the impact of its related default risks on the relationship between the chain's members. We consider a CCSCE consisting of a supplier and a retailer where the retailer may exert costly promotional efforts to increase the market demand but has limited capital and no access to bank financing due to low credit rating. Conversely, the supplier has adequate funds to offer trade credit to the retailer without borrowing from external channels. We then examine whether the existing coordination contracts can still coordinate the CCSCE under trade credit. Our result shows that these contracts can achieve coordination of the supply chain when the interest rate of trade credit is competitively priced. Nevertheless, this position cannot always be reached. That's why we propose a generalised contract based on risk compensation to coordinate the CCSCE. Using our proposed coordinating contract, the supplier perfectly coordinates the retailer's decisions for the largest joint profit, and arbitrarily allocates the maximised joint profit among supply chain members. Finally, the numerical study allows to verify this finding. From managerial insights, our results provide the supply chain managers with novel insights on how to combine trade credit with the existing coordination contracts in order to improve the profitability of the entire supply chain as well as the individual member.

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Section: Discussionmentioning

confidence: 90%

Supply chain coordination under trade credit and retailer effort

Phan

Lai

2019

International Journal of Production Research

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“…An interesting question to be addressed in future research on this issue should investigate whether the implementation of only one of the incentives (either the price incentive, or the advertising incentive), or both incentives enhance channel efficiency, and which scenario is the most preferred by each channel member, as in Karray and Surti ().…”

Section: Discussionmentioning

confidence: 99%

Incentive mechanisms for price and advertising coordination in dynamic marketing channels

Taboubi

2017

Int Trans Operational Res

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This paper examines the issue of price and advertising coordination in bilateral monopolies from a dynamic perspective. Its main objectives are to design incentive mechanisms that the manufacturer can use in order to reduce double marginalization, and to investigate whether these mechanisms can be implemented by the manufacturer and accepted by the retailer. I consider a differential game where a manufacturer controls its wholesale price and its national advertising effort. The carry‐over effects of national advertising build up brand goodwill, which represents the model's state variable. The retailer controls the product's retail price and the local advertising effort, which affect consumer demand, in conjunction with the brand goodwill. I compute strategies and outcomes under three scenarios: (a) a fully coordinated scenario where channel members act as if the channel was vertically integrated; (b) a noncoordinated scenario, considered as the status quo, where the channel is decentralized; and (c) a scenario where incentive mechanisms are offered by the manufacturer. The main results indicate that two incentive mechanisms, namely, a retail‐price incentive and an advertising allowance offered by the manufacturer to the retailer can mitigate the double‐marginalization problem. With these incentives, and an appropriate choice of the channel‐coordinating wholesale price, the manufacturer can induce the retailer to fix its control variables at their channel‐coordinating levels without committing to implement the channel‐coordinating level of national advertising. Our results highlight the role of the channel‐coordinating wholesale price level on the Pareto‐optimality and the implementation of the incentives. I compute the values for the channel‐coordinating wholesale price that can be used as benchmarks by channel members in order to evaluate if the incentives should be implemented or not. I illustrate our results with numerical simulations indicating the channel‐coordinating wholesale price values where we observe an increase in both channel members' individual profits when the incentives are implemented (i.e., with respect to the status quo). These results can be explained by the decrease in retail price and the increase in local and national advertising. Both effects explain the increase in brand goodwill and demand when the incentives are implemented.

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“…Most of the papers in the cooperative advertising literature with a static environment limit their analysis only to the advertising decisions of channel members (Karray and Zaccour, ; Wang et al., ; Yang et al., ; Zhang et al., ; Ahmadi‐Javid and Hoseinpour, ; Farshbaf‐Geranmayeh et al., ). However, in some of the papers, the analysis of other variables such as price (Karray and Zaccour, ; SeyedEsfahani et al., ; Aust and Buscher, ; Karray and Surti, ) and quality (Marchi and Cohen, ) in the channel is considered as well as advertising. Also in some papers, cooperative advertising is studied in a dynamic environment (Karray and Zaccour, ; Jørgensen et al., , , , ).…”

Section: Introductionmentioning

confidence: 99%

Cooperative advertising to induce strategic customers for purchase at the full price

Farshbaf‐Geranmayeh

Rabbani

Taleizadeh

2017

Int Trans Operational Res

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In this paper, cooperative advertising in a manufacturer–retailer supply chain in the presence of the strategic customer is studied. It is assumed that a proportion of the customers strategically postpone their purchase in order to achieve a higher surplus. Advertising can enhance the willingness to pay (WTP) of the customers and, as a result, their surplus. In this paper, the effect of cooperative advertising in order to induce customers for early purchase is analyzed. While customer purchasing in the full price leads to higher income for the retailer, it requires spending more on advertising. This trade‐off between the benefits of inducing customers to early purchases and the advertising expenditure is a key to understanding the retailer's optimal advertising decision. On the other hand, it is interesting for the manufacturer to find out when supporting the retailer for its advertising expenditure is beneficial. Nash and Stackelberg (manufacturer as a leader) game‐theoretic models are established to investigate whether, in the channel, it is optimal to induce customers by increasing advertising expenditure or not. Results of the Stackelberg game show that the manufacturer participates in the retailer's advertising expenditure only if it leads to early purchasing of the strategic customers and the participation rate depends on the wholesale price. From the retailer's point of view, when the impact of advertising on the WTP of customers is not significant, the more the proportion of strategic customers, the more inducing customers for early purchase is beneficial. When advertising effectively increases WTP, regardless of the fraction of strategic customers, it is beneficial for the retailer to enhance its advertising in order to dissuade customers from postponing their purchase.

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Channel coordination with quantity discounts and/or cooperative advertising

Cited by 23 publications

References 47 publications

Supply chain coordination under trade credit and retailer effort

Supply chain coordination under trade credit and retailer effort

Incentive mechanisms for price and advertising coordination in dynamic marketing channels

Cooperative advertising to induce strategic customers for purchase at the full price

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