Designing of Supply Chain Coordination Mechanism with Leadership Considering

Vertical cooperative advertising is typically a cost sharing mechanism and coordinated effort bychannel’s members in order to increase demand and overall profits. In this marketing strategy, themanufacturer shares a fraction of the retailer’s advertising investment. This paper studies theadvertising and pricing decisions in a retailer-manufacturer supply chain in which the market demandis simultaneously affected by retail price and members’ advertising efforts. We establish three noncooperative game-theoretic models and one cooperative model. A particular non-cooperative game can be played based on the channel type which can be retailer-dominant, manufacturer-dominant, or the same-power. We investigate feasibility of the cooperative game with the aim of channel coordination, and, utilize bargaining model in order to discuss how both members should split the extra profit obtained by moving to cooperation case.