Research on Channels of Dynamic Differential Game: Based on Long-Term Marketing Efforts of Retailers

The paper studies optimal decision-making of distribution channel comprised of one manufacturer and one retailer. The Retailer´s marketing effort is divided into two types: one is a short-term effort based on the increase of short-term demand; the other is a long-term effort based on brand building. The manufacturer hopes that the retailer can make more long-term efforts, so he has to give the retailer more drives, which are compensation incentive costs for the retailer´s long-term efforts. The paper establishes three game models according to this theory, which are long-term dynamic NG, MSG and RSG Research results based on the use of differential game methods show that given incentive coefficient in certain scope, optimal profit of both the manufacturer and the retailer will increase along with the increase of incentive coefficient. Also, the paper compares the profit of the manufacturer and the retailer in the three models, the profit of the entire channel, as well as the product reputation. Finally, issues to be studied are put forward.