The paper surveys the literature on cooperative advertising in marketing channels (supply chains) using game theoretic methods. During the last decade in particular this literature has expanded considerably and has studied both static and dynamic settings. The survey is divided into two main parts. The first one deals with cooperative advertising in simple marketing channels having one supplier and one reseller only. The second one covers marketing channels of a more complex structure, having more than one supplier and/or reseller.
In the first part we find that a number of results carry over from static to dynamic environments. We also find that the work on static models is quite homogeneous, i.e., most papers employ the same basic consumer demand specification and address the same situations of vertical integration and noncooperative games with simultaneous or sequential actions. The work on dynamic problems of cooperative advertising also shows some similarities. The dynamics are, with a few exceptions, variations on the Nerlove-Arrow model, the seminal work in the design of optimal advertising policies of a single firm using optimal control theory.
The number of models assuming the presence of horizontal interaction on either or both layers of the supply chain (second part) are much less numerous than those supposing its absence. Our review reveals that the participation rates in co-op programs depend on inter- and intra-brand competition, and may not always be in the best interest of the players involved in the marketing channel. Competition from private labels also matter.
Published April 2013 , 26 pages