A Model for R&D Investment, Operational Decision-Making and Cooperative Contracts of a Supply Chain in Complex Product Systems: Game Theoretic Approach

Document Type : Original Article

Authors

1 Associate Professor, Management and Industrial Engineering Department, Malek-Ashtar University of Technology, Tehran, Iran.

2 Ph.D, Industrial Engineering Department, Islamic Azad University, Tehran South Branch, Tehran, Iran.

Abstract

Introduction: Despite numerous studies on supply chain cooperation, research shows that collaborations in chains with asymmetric power structures leading to R&D investment have received less attention. This study aims to develop a model for the supply chain of a complex product, which includes operational decisions for market supply and R&D investment. The objectives include determining the equilibrium point between R&D investment, product price, and production amount, and investigating the impact of R&D uncertainty, buyer fairness, and customer sensitivity to product technology level on supply chain performance.
Methods: The model considers the risk of uncertainty in R&D output and a demand function dependent on product technology level. Developed under an asymmetric power structure, the model incorporates various cooperation contracts, including R&D cost sharing, production cost sharing, and revenue sharing. Each scenario is presented as a nonlinear two-level programming model, created using the Nash bargaining game approach and optimized through simulation.
Results and discussion: The research indicates that uncertainty risk reduces supply chain profit, but cooperation contracts can improve performance compared to a decentralized structure. The revenue sharing contract generates higher profit for both the supply chain and the supplier. However, from the buyer’s perspective, when bargaining power is relatively low, R&D cost sharing and production cost sharing contracts are more beneficial. Increasing buyer fairness improves overall supply chain performance in revenue sharing and R&D cost sharing structures. Market sensitivity to product technology level enhances chain performance in production cost sharing and R&D cost sharing structures, but not all chain members benefit in revenue sharing structures. Market sensitivity to price and buyer fairness respectively decrease and increase supply chain performance.
Conclusions: Considering the significant costs of R&D and production in complex products, addressing these costs in supply chain cooperation contracts and sharing them among influential factors can enhance supply chain performance. The bargaining power between buyers and sellers affects the type of contract. Given the unknown nature of information for supply chain parties, further models can be developed.

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Main Subjects

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