Advertising in supply chains commonly includes global advertising, which builds brand awareness, and local advertising, which converts potential customers into actual buyers. Despite their complementary roles, limited research has examined how these instruments should be jointly allocated when manufacturers face budget and production constraints. Motivated by real-world capacity disruptions such as the global chip shortage, this study develops a two-echelon supply chain model formulated as a Stackelberg game in which the manufacturer acts as the leader and retailers are followers. Retailers’ interactions are further characterized through a Generalized Nash game to capture strategic interdependence under shared capacity and cooperative advertising decisions. The manufacturer determines global advertising expenditure, the share of retailers’ local advertising costs, and production allocation, while retailers choose local advertising investments under competitive conditions. Three structures are analyzed: two decentralized settings, one with competitive local advertising and one without, and a fully centralized benchmark. Results show that centralized coordination yields the highest total supply chain profit. Among decentralized settings, eliminating predatory advertising improves overall supply chain performance, although competitive behavior may sometimes benefit retailers individually. The analysis further demonstrates that greater production capacity and higher manufacturer budgets increase participation in local advertising and enhance customer acquisition when advertising remains profitable. Importantly, global advertising alone cannot fully translate market potential into realized demand without sufficient local advertising support. These findings offer practical guidance for capacity-constrained industries, highlighting the importance of coordinated advertising strategies and appropriate participation policies to maximize profitability under resource limitations.
