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Co-op Advertising Analysis within a Supply Chain Based on the Product Life Cycle

This paper presents two types of game theory model for studying a cooperative advertising problem in one manufacturer and two retailers. Cooperative and noncooperative equilibrium are discussed respectively with three significant conclusions. First, increased investment in national advertising or a greater share taken by the manufacturer in the co-op expenditure can't always lead to the increased investment in local advertising by the retailer, it relevant to the product life cycle. Second, within different stage in product life cycle, the degree of the retailer's local advertising, sales response volume, profit affect by other retailer's marginal profit is relevant to the Spillover effect. Third, when the proportion of two retailer's marginal profit satisfies a certain condition, the profit with cooperation is high than noncooperation.