STM Article Repository

Cooperative (co-op) advertising is attracting more and more attention. This paper analyzes co-op advertising
behavior based on a dual brands model with a single manufacturer and a single retailer and some interesting
conclusions are achieved. Firstly, firm in the supply chain advertises both brands and the difference of
advertising expenditure is not very large in equilibrium. Secondly, the retailer’s advertising and the
manufacturer’s participation ratio depend on both the retailer’s and the manufacturer’s marginal profits. Thirdly,
stimulating effect increases advertising investment while competition effect decreases it, but they have no effect
on the manufacturer’s participation ratio. Fourthly, co-op advertising is more sensitive to the manufacturer’s
marginal profits than that of the retailer. Lastly, total advertising investment and profit are greater under
cooperative decision than under Stackelberg decision.