Dual-Channel Supply Chain Coordination Strategy with Dynamic Cooperative Advertising

With the rapid development of electronic commerce, many manufacturers choose to establish dualchannel supply chains. To promote sales, the manufacturer in a dual-channel supply chain usually invests in national advertising and provides support to the retailer who promotes the goodwill through local advertisement. In our research, we use a Stackelberg differential game theoretic model to show that the manufacturer who establishes an e-channel can adopt the cooperative advertising strategy with the retailer, so that the profits of both the manufacturer and the retailer will increase. We analyze the advantages brought by the e-channel which is established by the manufacturer. Further, a revenue sharing contract is given to coordinate the dual-channel supply chain. Key–Words: Electronic Commerce; Dual-channel Supply Chain; Cooperative Advertising; Stackelberg Differential Game; Nerlove-Arrow Model; Revenue Sharing Contract