Horizontal cooperative advertising among retailers in a decentralized supply chain

This paper considers a two-echelon supply chain, where a manufacturer sells a product in a market through n retailers, each experiencing a stochastic demand. The demand depends on both the manufacturer´s brand adverting and the retailers´ local advertising. We focus on the horizontal cooperative advertising issue among retailers in a decentralized supply chain. We formulate the setting as a corresponding cooperative game. The value of a coalition equals to the optimal joint expected profit they can achieve. We show that the core of such a game is never empty. Furthermore, for each game, we design a specific allocation of the expected total profit for all participants, which always belongs to the core of the game.