EFFECTS OF COMPETITION ON SOFTWARE AND SERVICE DECISIONS IN A CO-OPETITION SUPPLY CHAIN

Abstract

This study examines an IT supply chain with two software developers, a service integrator, and client enterprises, where developer A directly sells its software to the clients and developer B authorizes its software to the integrator for sale. Our analysis shows that developer A will increase (decrease) its software sales price and decrease (increase) its extended warranty service (EWS) sales price to compete with the integrator when the unit EWS cost is low (high) and the intensity of software competition between them increases; while the integrator will compete with developer A by sacrificing (improving) the pre-sales services (Pr-SS) quality and reducing its software sales price. Especially, when they are engaged in software competition and service cooperation, the profit of developer A surprisingly increases with the intensity of competition; when they are only engaged in software competition, the profit of developer A may still increase with the competitive intensity. Moreover, when the unit EWS cost is higher than a certain threshold, the profit of integrator increases with the competitive intensity. Under certain conditions, both the profit of developer A and that of integrator surprisingly increase with the competitive intensity