Pricing Decisions and Innovation Strategies Choice in Supply Chain with Competing Manufacturers and Common Supplier

Abstract

This paper evaluates efficacy of supplier and manufacturer innovation under an asymmetric competing supply chain consisting of one supplier and two manufacturers. We depict pricing decisions and innovation strategies under three models, namely, benchmark model, supplier-led, and manufacturer-led innovation models. It is shown that although the supplier is motivated to innovate, all innovation strategies have more profits than single innovation strategies. In addition, when no manufacturer creates the product, one manufacturer will obtain a good profit from the innovation, while facing the competitor, the other manufacturer will have incentive to innovate. Moreover, we also evaluate implications of innovation strategy for consumer welfare and overall supply chain efficiency.