An integrative framework of cooperative advertising with reference price effects

Guiomar Martín-Herrán, Simon Pierre Sigué

Research output: Contribution to journalJournal Articlepeer-review

6 Citations (Scopus)

Abstract

The importance of reference price effects in consumer behavior and marketing decisions is now well established in the literature. However, research on the impact of these effects on cooperative advertising decisions in marketing channels remains very limited. A two-period model is developed to analyze how members of a bilateral monopoly channel should set pricing and advertising decisions in a context where first-period price serves as the reference price of second period. By solving a Stackelberg game where the manufacturer is the leader, nine feasible equilibria are endogenously obtained. These equilibria correspond to different combinations (scenarios) of the respective decisions of the retailer and manufacturer to undertake or not and to support or not local advertising in each period. The profitability of each of these scenarios for the players and their pricing and advertising strategies over time depend, among others, on how sensitive consumers are to price changes over time.

Original languageEnglish
Article number103166
JournalJournal of Retailing and Consumer Services
Volume70
DOIs
Publication statusPublished - Jan. 2023

Keywords

  • Advertising
  • Cooperative advertising
  • Marketing channel
  • Pricing
  • Reference price

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