Advertising and Pricing Models in Supply Chains with Altruistic Behavior

Abstract:

We employ a game theoretical model to study not only advertising but also pricing strategy in supply chain and the market demand is influenced by the advertising level and retail price. Three different models are discussed which are decentralized model, cooperative model and altruistic model. Altruistic model is a model by introducing altruistic factors into the objective function of the supply chain participants. Finally, the influence of altruistic factors to equilibrium strategy and each participant profit under equilibrium strategy are discussed through numerical analysis. It is concluded that the manufacturer as the leader of the supply chain should consider not only his own profit but also the retailer’s profit. So the manufacturer has the higher altruism than the follower in order to promote the whole system profit.