Cooperative Advertising in a Dual Channel

The focus of this paper is cooperative(co-op)advertising in today´s electronic commerce(EC) market. The use of co-op advertising in a dual marketing channel has added a new dimension of competition. Our study provides an understanding of co-op advertising strategy in a dual channel supply chain under two different competitive types: Bertrand and Stackelberg equilibrium. We obtain both optimal Bertrand and Stackelberg equilibrium pricing and co-op advertising policies, while analyzing the strategic impact of co-op advertising on the dual channel supply chain. Finally, based on our results, we propose the optimal strategies that system members should adopt in a dual channel competition.