Advertising Decisions in a Vertical Distribution Channel

A manufacturer and a retailer are the members of a simple distribution channel for a particular product in a segmented market. The advertising efforts of the two agents have a joint effect on the goodwill of the different market segments and then on the demand. The channel members aim at maximizing their profits, by choosing suitable advertising media and efforts. We focus mainly on competition between manufacturer and retailer, obtaining Nash equilibrium strategies, in the contexts of linear and concave demand. We consider also the possibility of cooperation, obtaining the coordinated channel optimal decisions