Advertising Strategies of One E-Commerce Platform and Competitive Sellers in a Supply Chain Under Agency Mode

As the internet traffic dividend disappears, the growth of e-commerce platforms slows and competition among sellers increases. Cooperative advertising schemes between e-commerce platforms and sellers come into being. This paper considers advertising strategies in a supply chain with one e-commerce platform and two competitive sellers. When each seller can choose either cooperative advertising or independent advertising in a strategic game, this paper shows that the cooperative advertising strategy is a unique Nash equilibrium. Only when a seller has a relatively high revenue share ratio in the cooperative venture and competition with the other seller is low will the seller obtain higher profits by cooperative advertising than independent advertising. After competition increases to a certain level, the sellers fall into the prisoner's dilemma. On the platform’s view, cooperative advertising can be profitable and cooperating with two sellers is better than cooperating with only one. Finally, our numerical experiments discover that a seller’s market share can also impact its advertising strategy