Cooperative Advertising with Bilateral Participation


  • The authors gratefully acknowledge Vicki Smith-Daniels, an associate editor and two anonymous referees for many helpful comments and suggestions, which contributed significantly to improve the presentation of this note. This work was supported by the NSFC Projects No. 70971072, 71031005, and 71171165.

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We study cooperative (co-op) advertising strategies in a two-tier distribution channel and extend the popular unilateral participation strategy to bilateral participations. Our research shows that a properly designed bilateral participation has several advantages over unilateral participation. Bilateral participation is capable of coordinating the distribution channel under a very general demand function. In addition, when channel members determine participation parameters endogenously, the bilateral participation improves the channel efficiency and leads to a Pareto improvement over the corresponding unilateral participation.