Supply Chain Coordination with Dynamic Pricing Advertising and Consumer Welfare An Economic Application

Huijie Tang; Zhoufan Yu; Huanyu Liu

doi:10.70393/6a69656173.333230

OPEN ACCESS |Research Article ||2 October 2025

Supply Chain Coordination with Dynamic Pricing Advertising and Consumer Welfare An Economic Application

Huijie Tang

University of Michigan

tancredi@umich.edu

Master of Supply Chain Management, 500 S. State St, Ann Arbor, MI 48109, USA.

Zhoufan Yu

Cornell University

zy454@cornell.edu

Master's in Applied Economics and Management, Cornell University, Ithaca, New York, United States, 14850.

Huanyu Liu

Johns Hopkins University Carey Business School

hliu189@jh.edu

Johns Hopkins University Carey Business School，Master of Science in Marketing，100 International Drive, Baltimore, MD 21202, USA.

* Corresponding Author¹: Huijie Tang, E-Mail: tancredi@umich.edu

Publication

Accepted 2025 September 29 ; Published 2025 October 2

Journal of Industrial Engineering and Applied Science, 2025, 3(5), 3005-6071.

Abstract

In this paper, we construct a supply chain coordination model that considers the complex relationships among dynamic pricing, advertising investment, and consumer welfare. The model focuses on a supply chain consisting of a manufacturer and a retailer, where the manufacturer produces the product and the retailer sells it. We first analyze the equilibrium under decentralized decision-making, in which the retailer is the leader and the manufacturer the follower. By building a differential game model, we derive the optimal pricing and advertising strategies under decentralization. Then, we set a centralized optimal benchmark in which the supply chain acts as an integrated decision maker. Comparing decentralized and centralized decisions, we find a double-marginalization effect under decentralization that reduces the total profit of the supply chain. To address this, we design a series of coordinating contracts—including revenue sharing, price discount, and two-part tariff contracts—among which revenue sharing can effectively coordinate the chain and maximize total profit. We further analyze the effect of advertising on consumer welfare. Using a consumer welfare measurement model, we find that advertising increases consumer surplus and thus improves consumer welfare. Numerical simulations verify the effectiveness of the model and the superiority of the coordinating contracts.

Keywords

Supply Chain Coordination , Dynamic Pricing , Advertising Investment , Consumer Welfare , Game Theory , Econometrics .

Metadata

DOI:

10.70393/6a69656173.333230

ARK:

ark:/40704/JIEAS.v3n5a01

Pages: 1-6

References: 13

Disciplines: Applied Mathematics

Subjects: Mathematical Modeling

Cite This Article

APA Style

Tang, H., Yu, Z. & Liu, H. (2025). Supply chain coordination with dynamic pricing advertising and consumer welfare an economic application. Journal of Industrial Engineering and Applied Science, 3(5), 1-6. https://doi.org/10.70393/6a69656173.333230

Acknowledgments

The authors thank the editor and anonymous reviewers for their helpful comments and valuable suggestions.

FUNDING

Not applicable.

INSTITUTIONAL REVIEW BOARD STATEMENT

Not applicable.

DATA AVAILABILITY STATEMENT

The original contributions presented in the study are included in the article/supplementary material, further inquiries can be directed to the corresponding author.

INFORMED CONSENT STATEMENT

Not applicable.

CONFLICT OF INTEREST

The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

AUTHOR CONTRIBUTIONS

Not applicable.

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