Supplier's RD Investment in Manufacturer in A Decentralized Supply Chain with Quality and Price Sensitive Demand

摘要

This paper considers a supply chain with an upstream supplier and a downstream manufacturer, who faces a quality and price sensitive market demand. The supplier makes R&D investment in the manufacturer, which can lead to an improvement in the manufacturer's product quality, and hence, improve the efficiency of the entire supply chain. First, we derive the optimal retail price for the manufacturer, under any given R&D investment strategy of the supplier. Then, we characterize the supplier's optimal R&D investment strategy. We show that both the supplier and the manufacturer can benefit from such an investment, under certain condition.