E-ISSN 0331-8753 | ISSN 0794-5698
 

Original Research 


Modelling Subsidy as a Cooperative Advertising Channel Coordination Mechanism

P. E. Ezimadu.

Abstract
This work considers the use of subsidy as channel coordination strategy in vertical cooperative advertising in which the manufacturer is the Stackelberg game leader and the retailer is the follower. While the retailer is directly involved in advertising, the manufacturer is indirectly involved through the provision of subsidy to aid the retailer in advertising the product. The work models the demand function using a multiplicative advertising-price-demand function, and obtains the players’ prices, the retail advertising effort, the manufacturer’s subsidy rate and the payoffs. The work observes that with increasing subsidy, the manufacturer’s price margin increases while that of the retailer reduces and eventual becomes zero with total subsidy. However, the manufacturer should not totally subsidise retail advertising since it would be counterproductive for him, while at the same time would lead to very large retail payoff. Thus with appropriate subsidy strategy the prices and payoffs, and eventually the entire channel can be coordinated.

Key words: Channel coordination, Vertical cooperative advertising, Stackelberg game, Advertising-price-demand function, Subsidy rate


 
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How to Cite this Article
Pubmed Style

P. E. Ezimadu. Modelling Subsidy as a Cooperative Advertising Channel Coordination Mechanism. Nig. J. Basic Appl. Sci.. 2019; 27(2): 127-135. doi:10.4314/njbas.v27i2.17


Web Style

P. E. Ezimadu. Modelling Subsidy as a Cooperative Advertising Channel Coordination Mechanism. http://www.njbas-udus.com/?mno=49480 [Access: March 28, 2020]. doi:10.4314/njbas.v27i2.17


AMA (American Medical Association) Style

P. E. Ezimadu. Modelling Subsidy as a Cooperative Advertising Channel Coordination Mechanism. Nig. J. Basic Appl. Sci.. 2019; 27(2): 127-135. doi:10.4314/njbas.v27i2.17



Vancouver/ICMJE Style

P. E. Ezimadu. Modelling Subsidy as a Cooperative Advertising Channel Coordination Mechanism. Nig. J. Basic Appl. Sci.. (2019), [cited March 28, 2020]; 27(2): 127-135. doi:10.4314/njbas.v27i2.17



Harvard Style

P. E. Ezimadu (2019) Modelling Subsidy as a Cooperative Advertising Channel Coordination Mechanism. Nig. J. Basic Appl. Sci., 27 (2), 127-135. doi:10.4314/njbas.v27i2.17



Turabian Style

P. E. Ezimadu. 2019. Modelling Subsidy as a Cooperative Advertising Channel Coordination Mechanism. Nigerian Journal of Basic and Applied Sciences, 27 (2), 127-135. doi:10.4314/njbas.v27i2.17



Chicago Style

P. E. Ezimadu. "Modelling Subsidy as a Cooperative Advertising Channel Coordination Mechanism." Nigerian Journal of Basic and Applied Sciences 27 (2019), 127-135. doi:10.4314/njbas.v27i2.17



MLA (The Modern Language Association) Style

P. E. Ezimadu. "Modelling Subsidy as a Cooperative Advertising Channel Coordination Mechanism." Nigerian Journal of Basic and Applied Sciences 27.2 (2019), 127-135. Print. doi:10.4314/njbas.v27i2.17



APA (American Psychological Association) Style

P. E. Ezimadu (2019) Modelling Subsidy as a Cooperative Advertising Channel Coordination Mechanism. Nigerian Journal of Basic and Applied Sciences, 27 (2), 127-135. doi:10.4314/njbas.v27i2.17





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