Abstract: In this paper, a supply chain which consists of a single manufacturer and a single retailer doing cooperative advertising are studied under uncertain customer demand. The manufacturer determines the wholesale price and to what ratio he will share the retailer's investment in his local advertising. The retailer determines how much he will invest in his local advertising and the sales price. How information sharing affects the decision making of the manufacturer and the retailer as well as their performance are studied. The expected profit of the manufacturer, the retailer, and the supply chain as a whole are compared. The results show that information sharing increases the manufacturer’s expected profit, and sometimes the supply chain’s, but decreases the retailer’s expected profit under certain circumstances.

Key words: cooperative advertising, supply chain, information sharing, stackelberg game