A two-period game is developed in a bilateral monopoly where, besides pricing decisions, the
retailer and manufacturer can set their advertising and cooperative advertising support rates
for each period. It is demonstrated that, in addition to the established continuous cooperative
advertising programs, in which the retailer advertises and the manufacturer supports retailer
advertising in each period, two other advertising schedules are possible. First, the retailer
advertises in each period, while the manufacturer only supports the second-period advertising.
Second, whether or not the manufacturer provides a cooperative advertising program
in the first period, the retailer only advertises in the second period and receives advertising
support. The conditions under which each of these advertising arrangements is implemented
are identified. In a continuous cooperative advertising schedule, the manufacturer may change
his advertising support over time depending on the nature of the long-term effects of retailer
advertising. The implications of these findings are discussed.
