An investigation on research and development cost reduction and channel strategies in competing supply chains

Abstract

With the intensification of market competition, the competition form of firms is evolving from the competition among firms to the competition among supply chains. This paper considers a market with two competing supply chains consisting of one supplier and one manufacturer. The two supply chains compete on products' quantities and research and development (R&D) level when the two manufacturers conduct technological innovation. This paper analyses the supply chain competition in three scenarios: two decentralized supply chains (DD), one decentralized supply chain and one centralized supply chain (DC) and two centralized supply chains (CC). The results indicate that the production quantity, the R&D level and the total profit of the integrated supply chain in DC scenario are the largest, CC scenario comes second, those of the DD scenario come third and those of the decentralized supply chain in DC scenario are the smallest. CC strategy is the supply chain system's Nash equilibrium, which is good for the both supply chains, and there is no prisoner's dilemma. © 2014 Growing Science Ltd. All rights reserved.