Bundling Strategy and Cooperative Advertising Mechanism in a One-manufacturer One-retailer Supply Chain System

In this paper,we consider a two-echelon supply chain with a dominated manufacturer who produces its complementary products and a retailer who sells these products as a follower. Firstly a Stackelberg game model is developed to clarify the suitable conditions when the retailer adopts bundling strategy,and then we examine the optimal advertising investment level after adopting the bundling strategy. Finally a vertical cooperative advertising mechanism can be designed to coordinate the whole supply chain. The results indicate that when the value of the bundling discount price sensitivity is larger,the retailer should adopt the bundling strategy to sell complementary products. After adopting the bundling strategy,the retailer can further improve the its own and the manufacturer's profit level by carrying out advertising promotions. When the manufacturer implements the mechanism of vertical cooperation advertising,in order to achieve the purpose of improving the efficiency of the supply chain,the proportion of the share given to the retailer should not be too high.