THEORETICAL-GAME MODELS OF MANUFACTURER AND INTERMEDIARY INTERACTION IN THE CHANNEL OF COMMODITY MOVEMENT

Abstract

The article defines key factors of influence on the consumer demand function formation (wholesale manufacturer price, retail price of the intermediary, manufacturer and intermediary costs for cooperative advertising, the percentage of manufacturer participation in advertising costs for the intermediary) on the basis of static, one-period models, which allow to study the mutual influence of the main cooperative interaction components in more detail and in order to avoid conflicts in the channel of commodity movement. The article focuses on the essential role played by vertical cooperative advertising in the process of generating profits in the distribution channel due to the hierarchy of marketing channels, as well as the need to take into account the redistribution of power relations among channel participants in the study of their cost structure.
The scheme of cooperative advertising’s positive influence on vertical marketing channel participants activity is presented. Within this scheme the participation of the manufacturer in cooperative interaction is determined by two parameters, such as transfer price and share of expenses for cooperative advertising on the local level. In turn, the intermediary, having the opportunity to purchase the product from the manufacturer at a relatively lower price and transferring to the manufacturer the part of advertising costs, provides greater sales of goods to the end users at the level required by the manufacturer.
The relationship between cooperative advertising and pricing policy of the manufacturer / intermediary is analyzed, since it is relevant to simultaneously take into account the influence of both factors (price policy and cooperative advertising costs of the manufacturer and the intermediary) on the formation of consumer demand of the product in the channel of commodity movement. The static model of the interaction between the manufacturer and the intermediary under the conditions of cooperation is taken into consideration.
The influence of cooperative advertising on the participants’ activities in the vertical marketing channel, as well as the relationship between cooperative advertising and price strategies of the participants in the marketing channel, is explored. The two-stage, non-dynamic, theoretical game of the manufacturer and the intermediary interacting in the vertical marketing channel regarding the distribution of profits from the product sale, the demand for which is insensitive to the changes in the price level, is considered. The basic game-theoretical models were constructed, which enabled to consider specific game situations, taking into account the cooperative interaction of the manufacturer and the intermediary in the marketing channel.
The presented models of profit generation in dimensionless form provide the basis for studying possible scenarios of the distribution channel players, who interact on the terms of cooperation and seek to maximize their own incomes. It is shown that finding the solution for the problem of profits optimizing in a marketing channel is closely linked with the solution of the issue of coordinated interaction between the manufacturer and the intermediary in the form of joint optimal price strategies adoption and strategies for the cooperative advertising costs formation. Function of the manufacturer obtained in the dimensionless form of the revenue, the intermediary and the joint profit of the marketing channel will enable to receive dimensionless solutions in the simulation.