Abstract—Modern products such as smart phones are quickly updated with limited innovation. However, the promotion level of these products is very high in the market. Literature has not adequately addressed this phenomenon above. This paper studies it from consumer behavior and the collaboration of the supply chain. The model of this paper integrates firms' innovation and promotion decisions in a two-tier supply chain, where a monopoly manufacturer sells products to end-customers through a distributor. The level of product renewal and the level of promotion are decided by the manufacturer and the dealer respectively. Research shows that, when the proportion of marginal revenue between the manufacturer and the distributor meets certain conditions, the game has a unique equilibrium. The manufacturer has the only optimal level of product innovation. In addition, if the manufacturer chooses the best participation rate with the distributor to carry out the product promotion, the profits of both sides are increased. We can see that the collaboration of the supply chain indirectly promotes the limited product updates. The conclusions of the study have some guiding significance for the product innovation and promotion.
Index Terms—Innovation, promotion, collaboration, consumer behavior.
The authors are with the Business School, University of Shanghai for Science and Technology, Shanghai, 200093, P.R. China (e-mail: jun920802@126.com, qushaojian@usst.edu.cn, panpan7819@126.com).
[PDF]
Cite: Effects of Reference Price and Collaborative Product Promotion on Product Innovation in Supply Chain, "Effects of Reference Price and Collaborative Product Promotion on Product Innovation in Supply Chain," International Journal of Modeling and Optimization vol. 8, no. 5, pp. 281-289, 2018.
