Abstract: The cooperative advertising strategy is analyzed for a twoechelon supply channel composed of a single manufacturer and a single retailer. To do so, game models are developed for it. Based on the models, the advertising cost for both manufacturer and retailer is analyzed under the optimal cooperative strategies of noncooperative static game, Stackelberg leaderfollower game, and Nash cooperative game, respectively. Results show that the advertising level, ordering quantity, and system profit obtained by cooperation are better than those without cooperation. In additional, the nationalwide advertising level is negatively related to the manufacturers advertising cost, whereas it is positively related to retailers advertising level. A numerical example is used to show the results.

Key words: supply chain, cooperative advertising, game theory, bargaining