Advertising and pricing policies in a two-echelon supply chain with a capital-constrained retailer

Yang Honglin; Chu Lingling; Zhuo Wenyan

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Advertising and pricing policies in a two-echelon supply chain with a capital-constrained retailer

Yang Honglin 1 *,Chu Lingling 2,Zhuo Wenyan 2

1.School of Business Administration, Hunan University, Changsha, Hunan 410082;School of Business Administration, Hunan University, Changsha, Hunan 410082;School of Business Administration, Hunan University, Changsha, Hunan 410082

*Correspondence author

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Funding: none

Opened online:29 March 2018

Accepted by: none

Citation: Yang Honglin,Chu Lingling,Zhuo Wenyan.Advertising and pricing policies in a two-echelon supply chain with a capital-constrained retailer[OL]. [29 March 2018] http://en.paper.edu.cn/en_releasepaper/content/4743941

We consider a two-echelon supply chain consisting of an upstream supplier and a downstream retailer in which demand is sensitive to retail price and advertising expenses. The capital-constrained retailer employs advertisements and may fund order by the supplier\'s trade credit. We solve the equilibria in the Stackelberg game with the supplier as a leader and the retailer as a follower. It has been found that the retailer with less initial capital prefers to fully invest advertisements irrespective of the advertising elasticity and interest rate charged by the supplier, whereas the retailer with more initial capital only partially invests advertisements. We identify the impacts of the advertising elasticity and interest rate on the wholesale and retail pricing. The numerical simulations illustrate our theoretical results and show that the retailer\'s advertising policies in different initial capital levels always benefit the supply chain.

Keywords:supply chain; capital-constrained retailer; trade credit; advertising and pricing policies

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