Stackelberg DifferentialGameM odel for Cooperative Advertising Strategies in Supply Chain

Dynamic cooperative advertising strategies in a supply chainwith a singlemanufacture and an exclusive retailerwere studied. Themanufacture acts as the channel leader to design and implement a dynamic advertising program to support advertising effort of the retailer to optimize his own and the retailer s profi.t Theymaymake advertising expenditures on both shortand long term advertising. The manufacture pays a certain costs of the retailer for advertising. Stackelberg differentialgamemodelwas used to describe the strategiesof themanufacturerand the retailer. The stationary feedback Stackelberg equilibrium was characterized using dynamic programming principle. The results show that the types of advertising of the retailer supported by the manufacture are determined by the marginal profits of the bothmembers. In the equilibrium advertising strategies, themanufacturerpaysmuch of its attention to long term advertising to build brand goodwil,l while the retailer lays stress on short term advertising to stimulate sales under the support of the manufacture. Cooperative advertising scheme is a coordinate mechanism in a supply chain that induces the retailer to follow themanufacturer.