Most of the cooperative advertising literature has focused on studying the
effects of such programs considering marketing variables. This paper
integrates production and inventory management with pricing and advertising
considerations to assess the effects of cooperative advertising programs in
bilateral monopolies. We consider a supply chain where a Vendor Managed
Inventory (VMI) along with a consignment contract is implemented to
coordinate the chain. We develop and solve a differential model for two
games. The first one is a benchmark scenario where no cooperative
advertising is offered, while the manufacturer offers the cooperative
program in the second game. The main results show that cooperative
advertising programs, usually considered as successful marketing
initiatives, can be very difficult to implement in a supply chain
undertaking a VMI policy with a consignment contract, in which operations
and marketing interface in taken into account. A cooperative program mainly
hurts the manufacturer's profits, and can be profit-Pareto-improving only in
a few cases. Although the retailer is generally willing to receive a support
from the manufacturer, she can opt for a non-cooperative program when the
largest part of the supply chain profits goes to the manufacturer.
