A study of dynamic joint promotion strategies in the distribution channel

• Main Authors: Hui Yu, Dongyan Chen, Chunli Huang
• Format: Article
• Language: English
• Published: Taylor & Francis Group 2018-01-01
• Series: Systems Science & Control Engineering
• Subjects: Distribution channel; joint promotions; Hamilton–Jacobi–Bellman equation; game theory
• Online Access: http://dx.doi.org/10.1080/21642583.2018.1518167

This paper is concerned with the optimal decision problems for a class of dynamic joint promotions in the distribution channel. Here, the evolution of brand goodwill is allowed to be influenced by vertical joint promotions (VJP) and horizontal joint promotions (HJP). By applying the Hamilton–Jacobi–Bellman (HJB) equation, the optimal VJP and HJP strategies, the wholesale prices and the VJP participation rates are obtained under the Decentralized-Decentralized (DD) and Decentralized-Centralized (DC) channel structures, respectively. The comparison between the two channel structures shows that channel members are inclined to take the DC channel structure when HJP's impact factor θ is no less than a given constant. Finally, two numerical examples are given to show the changes of manufacturers' and retailers' profits with η under the different channel structures.