Share This Article:

Strategic Commitment to Price in a Supply Chain with Downstream Innovation

Full-Text HTML XML Download Download as PDF (Size:311KB) PP. 1690-1704
DOI: 10.4236/ojbm.2019.74117    76 Downloads   189 Views


We consider a supply chain with an upstream supplier and a downstream manufacturer who invests in innovation. We present an analytical framework for innovation decisions in a centralized, a flexible price and a commitment to price. These results show that the innovation by commitment to price is still insufficient and the supplier remains flexible price beyond a threshold amount of demand uncertainty. To solve this problem, we propose a combination mechanism, which consists of a commitment to price, a cost sharing and a compensation for the risk of demand uncertainty. We study the impact of combination mechanism with endogenous downstream innovation. Our research results show that the innovation by combination mechanism may be greater than or equal to the one by a centralized. More importantly than all of that, the combination mechanism can improve the performance of the supply chain and ensure that both supply chain members achieve a win-win situation.

Cite this paper

Chang, X. and Shen, F. (2019) Strategic Commitment to Price in a Supply Chain with Downstream Innovation. Open Journal of Business and Management, 7, 1690-1704. doi: 10.4236/ojbm.2019.74117.

Copyright © 2019 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.