A game-theoretic model for co-promotions: Choosing a complementary versus an independent product ally |
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| Institution: | 1. Faculty of Business and Information Technology, University of Ontario Institute of Technology (UOIT), Oshawa, ON, Canada L1H 7K4;2. Faculty of Business, Athabasca University, Canada;1. School of Economics and Management, Nanjing University of Science and Technology, Nanjing 210094, People?s Republic of China;2. Department of Logistics and Maritime Studies, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong;1. Institute of Applied Mathematics, Department of Logistics, Wroclaw University of Economics, ul. Komandorska 118/120, 53-345 Wroclaw, Poland;2. Business Economics Group, Wageningen University, Hollandseweg 1, 6706 KN Wageningen, Netherlands;3. Food and Resource Economics Department, University of Florida, McCarty Hall A (MCCA), P.O. Box 110240, Gainesville, FL 32611-0240, USA;1. Department of Business Administration, Hacettepe University, Ankara, Turkey;2. Warwick Business School, University of Warwick, Coventry CV4 7AL, UK;1. Department of Information Systems and Operations Management, Sawyer Business School, Suffolk University, Boston, MA 02108, USA;2. Department of Supply Chain and Information Systems, Smeal College of Business, The Pennsylvania State University, University Park, PA 16802, USA;1. Department of Management Sciences, City University of Hong Kong, Tat Chee Ave, Kowloon Tong, Hong Kong;2. School of Physical and Mathematical Sciences, Nanyang Technological University, Singapore 637371, Singapore;1. Production Engineering Department, São Paulo State University, Av. Eng. Luiz Edmundo C. Coube 14-01, Bauru, São Paulo 17033-360, Brazil;2. Department of Management, University of Brasília (UnB), Campus Darcy Ribeiro, Brasília, Federal District 70910-900, Brazil;3. Production Engineering Department, School of Engineering of São Carlos, University of São Paulo – USP, Av. Trabalhador São carlense 400, São Carlos, São Paulo 13566-590, Brazil |
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| Abstract: | This paper studies the optimal choice of promotional partners in a three-firm market where two firms sell complementary products and a third firm sells an independent product. Game-theoretic models are developed to investigate the following scenarios: no promotional partnership, partnership between the two complementary products, partnership between a complementary product and the independent product, and partnership between the three products. Equilibrium Nash solutions are obtained and conditions under which each of the four scenarios above can be implemented are identified. Results show that these conditions depend on various parameters, mainly the degree of product complementarity, the effectiveness of individual promotion, the effectiveness of joint promotion, and the base demand for each product. Commonly, a partnership between a complementary product and the independent product is optimal when the price effect of the complementary product is large, while the partnership between the two complementary products is more appealing when the effect of individual promotion is large enough. When feasible, a promotional partnership between the three products is preferred, except in some specified conditions. |
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| Keywords: | Promotional alliance Complementary product Joint promotion Independent product Game theory Marketing–OR interface |
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