Group for Research in Decision Analysis

G-2017-20

When should a retailer invest in brand advertising?

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We consider a dynamic marketing channel comprising of one manufacturer and one retailer, where consumer demand depends on price and on brand reputation. We investigate two scenarios. In the first one, the retailer may also invest in brand advertising, while in the second, it does not. Comparing the results of the two scenarios yields interesting insights into the impact of the retailer's brand advertising. Findings include that when the retailer invests in the brand's reputation, both players achieve higher profits and the consumer obtains a higher surplus. This gives the retailer's brand advertising a (partial) channel coordination flavor, a result that has never before been reported in the literature.

, 17 pages