Should the pricing or advertising decision come first in a supply chain with a network externality?
Bibliographic record
Abstract
Purpose This paper aims to study how the timing of these decisions affects the total profit and the individual profits of the two agents. Design/methodology/approach This paper study a supply chain for a network good where there is a manufacturer and a retailer. The manufacturer determines its wholesale price and its share in the retailer’s advertising cost while the retailer decides the retail price and the advertising cost. Findings This paper finds that a stronger network externality leads to higher prices and higher advertising efforts. This increases the profits of both manufacturer and retailer, but the manufacturer’s share of advertising costs depends on the order in which the supply chain enterprise make their decisions, the strength of network externality and the effect of advertising determines which decision timeline results in a higher price and greater advertising effort. The manufacturer prefers the price decision to be made before the advertising decision, while the retailer prefers these decisions to be made simultaneously. Research limitations/implications Although this paper studies the price and advertising decision-making order preferences of channel members based on network externalities, this research can also be expanded from the following aspects based on network effects. First, network externality affects advertising cooperation between both parties in the situation such that the pricing power of retail prices is transferred from the retailer to the manufacturer and the retailer relies on revenue sharing (revenue sharing contract, nonwholesale price contract. Second, the manufacturer dominates the issues in the supply chain, but in reality, a retailer can also be the dominator or there are no dominators (Nash equilibrium). Finally, it is possible to consider pricing and advertising decisions in situations where two manufacturers or retailers compete. Practical implications When the price is reasonable, advertising investment is the main determinant of product sales. The greater the intensity of network externalities the more retailers will be willing to invest in advertising. An increase in the intensity of network externalities may not necessarily enhance manufacturers’ motivation or cooperative advertising, but it depends on the decision-making sequence. The strength of network externalities determines the decision-making sequence preferences of supply chain channel members whose preferences vary leading to conflicts of interest. Originality/value The impact of cooperative advertising or decision sequence on corporate decision-making has not been considered. To fill this gap, the paper integrates network externality and supply chain cooperative advertising models, focusing on the impact of network externality on pricing and advertising decisions, as well as on the sequence of decisions.
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How this classification was reachedexpand
Full frame distilled prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. Learned from the 10,348 direct Codex labels and 10,348 direct Gemma labels. Candidate is the union of thresholded teacher heads; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels or direct frontier model labels.
Codex and Gemma teacher scores by category
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.003 | 0.001 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.000 | 0.000 |
| Bibliometrics | 0.000 | 0.001 |
| Science and technology studies | 0.000 | 0.000 |
| Scholarly communication | 0.002 | 0.004 |
| Open science | 0.000 | 0.000 |
| Research integrity | 0.000 | 0.000 |
| Insufficient payload (model declined to judge) | 0.000 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one teacher head, not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".