Cost allocation strategies of gift cards in supply chain dominated by manufacturer

In recent years, with the intensification of market competition, more and more firms tend to use gift cards promotion. In this paper, we consider the use of manufacturer sponsored retailer-issued gift cards in a single manufacturer single retailer supply chain. We use a Stackelberg game framework where the manufacturer is the leader. We analyze the result of the supply chain with cost allocation strategies and compare it to the supply chain without cost allocation strategies. We find that cost allocation strategies can increase the retailer´s price and expected consumer demand in a certain condition. Furthermore, this strategies also increase the expected profit of manufacturer, retailer and the whole supply chain. In other words this strategies are effective, in the model, they not only increase the expected profit of supply chain, but also promote the expansion of the market.