Coordinating a supply chain with negative effect of retailer’s local promotion on goodwill and reference price
RAIRO - Operations Research - Recherche Opérationnelle, Tome 51 (2017) no. 1, pp. 227-252.

This paper investigates a distribution channel consisting of a manufacturer and a retailer under a cooperative program, where the manufacturer determines the national advertising and quality improving effort, while the retailer decides the local promotion effort and may undertake parts of the costs of national advertising and quality improving of the manufacturer. It is assumed that the manufacturer’s national advertising and quality improving efforts positively affect the brand goodwill and reference price, whereas the retailer’s local promotion effort damages them. Three scenarios of the non-cooperative and cooperative scenarios in the decentralized supply chain, and the centralized supply chain scenario, are analyzed. The corresponding equilibrium strategies and profits are obtained and compared, which shows that the cooperative program can achieve payoff-Pareto-improving, but cannot coordinate completely the supply chain. Furthermore, a revenue sharing contract combined with two-subsidy policy is designed to coordinate the decentralized supply chain. Numerical simulation and sensitivity analysis of the coordinating results on the key system parameters are provided to verify the effectiveness of the contract, and some managerial insights are provided.

Reçu le :
Accepté le :
DOI : 10.1051/ro/2016019
Classification : 90B60, 49J15
Mots clés : Supply chain coordination, cooperative program, revenue sharing contract, reference price, local promotion
Lu, Lihao 1 ; Zhang, Jianxiong 1 ; Tang, Wansheng 1

1 College of Management and Economics, Tianjin University, Tianjin 300072, P.R. China.
@article{RO_2017__51_1_227_0,
     author = {Lu, Lihao and Zhang, Jianxiong and Tang, Wansheng},
     title = {Coordinating a supply chain with negative effect of retailer{\textquoteright}s local promotion on goodwill and reference price},
     journal = {RAIRO - Operations Research - Recherche Op\'erationnelle},
     pages = {227--252},
     publisher = {EDP-Sciences},
     volume = {51},
     number = {1},
     year = {2017},
     doi = {10.1051/ro/2016019},
     zbl = {1358.90064},
     mrnumber = {3605901},
     language = {en},
     url = {http://archive.numdam.org/articles/10.1051/ro/2016019/}
}
TY  - JOUR
AU  - Lu, Lihao
AU  - Zhang, Jianxiong
AU  - Tang, Wansheng
TI  - Coordinating a supply chain with negative effect of retailer’s local promotion on goodwill and reference price
JO  - RAIRO - Operations Research - Recherche Opérationnelle
PY  - 2017
SP  - 227
EP  - 252
VL  - 51
IS  - 1
PB  - EDP-Sciences
UR  - http://archive.numdam.org/articles/10.1051/ro/2016019/
DO  - 10.1051/ro/2016019
LA  - en
ID  - RO_2017__51_1_227_0
ER  - 
%0 Journal Article
%A Lu, Lihao
%A Zhang, Jianxiong
%A Tang, Wansheng
%T Coordinating a supply chain with negative effect of retailer’s local promotion on goodwill and reference price
%J RAIRO - Operations Research - Recherche Opérationnelle
%D 2017
%P 227-252
%V 51
%N 1
%I EDP-Sciences
%U http://archive.numdam.org/articles/10.1051/ro/2016019/
%R 10.1051/ro/2016019
%G en
%F RO_2017__51_1_227_0
Lu, Lihao; Zhang, Jianxiong; Tang, Wansheng. Coordinating a supply chain with negative effect of retailer’s local promotion on goodwill and reference price. RAIRO - Operations Research - Recherche Opérationnelle, Tome 51 (2017) no. 1, pp. 227-252. doi : 10.1051/ro/2016019. http://archive.numdam.org/articles/10.1051/ro/2016019/

F.M. Bass, A. Krishnamoorthy, A. Prasad and S.P. Sethi, Generic and brand advertising strategies in a dynamic duopoly. Marketing Sci. 24 (2005) 556–568. | DOI

M. Bergen and G. John, Understanding cooperative advertising participation rates in conventional channels. J. Marketing Res. 34 (1997) 357–369. | DOI

R. Blattberg and S. Neslin, Sales Promotion: Concepts, Methods, and Strategies. Prentice-Hall, Englewood Cliffs, New Jersey (1990).

R.A. Briesch, L. Krishnamurthi, T. Mazumdar and S.P. Raj, A comparative analysis of reference price models. J. Consumer Res. (1997) 202–214.

X. Brusset, Estimating the supply chain efficiency loss when the seller has to estimate the buyer’s willingness to pay. RAIRO: OR 48 (2014) 477–496. | DOI | Numdam | MR | Zbl

G.P. Cachon, Supply chain coordination with contracts. In Handbooks in operations research and management science: Supply chain management, edited by S. Graves and T. de Kok. Amsterdam, North-Holland (2003). | MR

G.P. Cachon and M.A. Lariviere, Supply chain coordination with revenue-sharing contracts: Strengths and limitations. Manage. Sci. 51 (2005) 30–44. | DOI | Zbl

R.B. Chase, Production and Operations Management: Manufacturing and Services. Irwin/McGraw- Hill (1998).

T.H. Chen, Coordinating the ordering and advertising policies for a single-period commodity in a two-level supply chain. Comput. Ind. Eng. 61 (2011) 1268–1274. | DOI

K. Chen, L. Yang and Y. Liu, An analysis of supply chain decisions with asymmetrical retailers: Effects of disruptions and static service cost on coordination mechanism. RAIRO: OR 46 (2012) 159–187. | DOI | Numdam | Zbl

P.K. Chintagunta and D. Jain, A dynamic model of channel member strategies for marketing expenditures. Marketing Sci. 11 (1992) 168–188. | DOI

A. Chutani and S.P. Sethi, Optimal advertising and pricing in a dynamic durable goods supply chain. J. Optim. Theory Appl. 154 (2012) 615–643. | DOI | MR | Zbl

D. Dalalah, LSP-constrained supply chains: A discrete event simulation model. RAIRO: OR 50 (2016) 1–17. | Numdam | MR

S. Davis, J.J. Inman and L. Mcaslister, Promotion has a negative effect on brand evaluations: Or does it? additional disconfirming evidence. J. Marketing Res. 29 (1992) 143–148.

P. De Giovanni, Quality improvement vs advertising support: Which strategy works better for a manufacturer? Eur. J. Oper. Res. 208 (2011) 119–130. | DOI | MR | Zbl

X. Feng, I. Moon and K. Ryu, Revenue-sharing contracts in an N-stage supply chain with reliability considerations. Int. J. Prod. Econ. 147 (2014) 20–29. | DOI

G. Fibich, A. Gavious and O. Lowengart, Explicit solutions of optimization models and differential games with nonsmooth (asymmetric) reference-price effects. Oper. Res. 51 (2003) 721–734. | DOI | MR | Zbl

G. Fibich, A. Gavious and O. Lowengart, Optimal price promotion in the presence of asymmetric reference-price effects. Manage. Dec. Eco. 28 (2007) 569–577. | DOI

Q. Geng, C. Wu and K. Li, Pricing and promotion frequency in the presence of reference price effects in supply chains. California J. Oper. Manage. 8 (2010) 74–82.

X. He, A. Prasad and S.P. Sethi, Cooperative advertising and pricing in a dynamic stochastic supply chain: Feedback stackelberg strategies. Prod. Oper. Manage. 18 (2009) 78–94.

X. He, A. Krishnamoorthy, A. Prasad and S.P. Sethi, Retail competition and cooperative advertising. Oper. Res. Lett. 39 (2011) 11–16. | DOI | MR | Zbl

X. He, A. Krishnamoorthy, A. Prasad and S.P. Sethi, Co-op advertising in dynamic retail oligopolies. Dec. Sci. 43 (2012) 73–106. | DOI

Z.M. Huang and S.X. Li, Co-op advertising models in manufacturer-retailer supply chains: A game theory approach. Eur. J. Oper. Res. 135 (2001) 527–544. | DOI | MR | Zbl

Z.M. Huang, S.X. Li and V. Mahajan, An analysis of manufacturer-retailer supply chain coordination in cooperative advertising. Dec. Sci. 33 (2002) 469–494. | DOI

A. Jamal, S. Peattie and K. Peattie, Ethnic minority consumers’ responses to sales promotions in the packaged food market. J. Retailing Consumer Ser. 19 (2012) 98–108. | DOI

S. Jørgensen and G. Zaccour, A differential game of retailer promotions. Automatica 39 (2003) 1145–1155. | DOI | MR | Zbl

S. Jørgensen, S.P. Sigue and G. Zaccour, Dynamic cooperative advertising in a channel. J. Retailing 76 (2000) 71–92. | DOI

S. Jørgensen, S. Taboubi and G. Zaccour, Cooperative advertising in a marketing channel. J. Optim. Theory Appl. 110 (2001) 145–158. | DOI | MR | Zbl

S. Jørgensen, S. Taboubi and G. Zaccour, Retail promotions with negative brand image effects: Is cooperation possible? Eur. J. Oper. Res. 150 (2003) 395–405. | DOI | MR | Zbl

S. Jørgensen, S. Taboubi and G. Zaccour, Incentives for Retailer Promotion in a Parketing Channel. Springer (2006). | MR | Zbl

G. Kalyanaram and R.S. Winer, Empirical generalizations from reference price research. Marketing Sci. 14 (1995) 161–169. | DOI

P.K. Kopalle, A.G. Rao and J.L. Assuncao, Asymmetric reference price effects and dynamic pricing policies. Marketing Sci. 15 (1996) 60–85. | DOI

X. Li and Q. Wang, Coordination mechanisms of supply chain systems. Eur. J. Oper. Res. 179 (2007) 1–16. | DOI | Zbl

T. Mazumdar, S. Raj and I. Sinha, Reference price research: review and propositions. J. Marketing 69 (2005) 84–102. | DOI

A. Nair and R. Narasimhan, Dynamics of competing with quality-and advertising-based goodwill. Eur. J. Oper. Res. 175 (2006) 462–474. | DOI | Zbl

J. Nasiry and I. Popescu, Dynamic pricing with loss-averse consumers and peak-end anchoring. Oper. Res. 59 (2011) 1361–1368. | DOI | MR | Zbl

K. Pan, K.K. Lai, S.C. Leung and D. Xiao, Revenue-sharing versus wholesale price mechanisms under different channel power structures. Eur. J. Oper. Res. 203 (2010) 532–538. | DOI | Zbl

I. Popescu and Y. Wu, Dynamic pricing strategies with reference effects. Oper. Res. 55 (2007) 413–429. | DOI | MR | Zbl

S.P. Sethi, Deterministic and stochastic optimization of a dynamic advertising model. Optim. Con. Appli. Meth. 4 (1983) 179–184. | DOI | Zbl

J. Vörös, The dynamics of price, quality and productivity improvement decisions. Eur. J. Oper. Res. 170 (2006) 809–823. | DOI | MR | Zbl

S.D. Wang, Y.W. Zhou, J. Min and Y.G. Zhong, Coordination of cooperative advertising models in a one-manufacturer two-retailer supply chain system. Comput. Ind. Eng. 61 (2011) 1053–1071. | DOI

R.S. Winer, A reference price model of brand choice for frequently purchased products. J. Consumer Res. 13 (1986) 250–256. | DOI

J. Xie and A. Neyret, Co-op advertising and pricing models in manufacturer-retailer supply chains. Comput. Ind. Eng. 56 (2009) 1375–1385. | DOI

J. Xie and J.C. Wei, Coordinating advertising and pricing in a manufacturer-retailer channel. Eur. J. Oper. Res. 197 (2009) 785–791. | DOI | MR | Zbl

J. Yang, J. Xie, X. Deng and H. Xiong, Cooperative advertising in a distribution channel with fairness concerns. Eur. J. Oper. Res. 227 (2013) 401–407. | DOI | MR | Zbl

J. Yue, J. Austin, M.C. Wang and Z. Huang, Coordination of cooperative advertising in a two-level supply chain when manufacturer offers discount. Eur. J. Oper. Res. 168 (2006) 65–85. | DOI | Zbl

J. Zhang, Q.L. Gou, L. Liang and Z.M. Huang, Supply chain coordination through cooperative advertising with reference price effect. Omega-Int. J. Manage. S. 41 (2013) 345–353. | DOI

Q. Zhang, J.X. Zhang and W.S. Tang, A dynamic advertising model with reference price effect. RAIRO: OR 49 (2015) 669–688. | DOI | Numdam | MR | Zbl

Cité par Sources :