Strategic promotion decisions of competing mobile application suppliers in Stackelberg game context

This paper considers a marketplace coexisting a brand mobile application supplier and an ordinary one providing customers with substitutable software service. The two suppliers can either promote the software individually (SP strategy) or resort to the downstream distributor (MP strategy) to achieve higher market demand. Taking the downstream distributor's revenue sharing behavior and the demand expansion effect of MP strategy into consideration, we build a two-stage Stackelberg game model to explore the suppliers' equilibrium promotion and pricing decisions. Through analysis, we obtain the following significant conclusions and managerial implications. Firstly, both suppliers would price highest in MM model. Secondly, the brand supplier prices higher in MS model than that in SM model while the ordinary supplier prices higher in MS model than that in SM model only when the brand difference between two suppliers is sufficiently high. Thirdly, when the demand expansion effect of MP strategy and the brand difference between two suppliers are both relatively low, SS may become the equilibrium no matter how high the revenue retaining ratio is, which inspires the suppliers in application supply chain to think outside the box. That is, it is not always beneficial to choose MP strategy when the revenue retaining ratio is sufficiently high. Noticeably, the above conclusions remain robust in extended models. Finally, while SM would never be the unique equilibrium in simultaneous game, it can be the equilibrium in sequential game.