Supplier's cooperation strategy with two competing manufacturers under wholesale price discount contract considering technology investment.

Cooperation between upstream suppliers and downstream manufacturers in technology investment is a popular way to improve production technology for reducing suppliers' production costs of key components. The suppliers' cooperation strategies are mainly influenced by manufacturers' technology investments and wholesale price discount contracts provided by suppliers. This paper explores whether a supplier should cooperate with two downstream competing manufacturers to accept their technology investments to reduce the supplier's production cost of a key component. Specifically, we consider the following three cooperation strategies: The supplier does not accept manufacturers' technology investments, only accepts one manufacturer's technology investment and accepts both manufacturers' technology investments. Our results demonstrate that the wholesale price discount contract and the technology investment can enhance the profits of the supplier and two manufacturers when the discount degree is low. Further, we conclude that when the discount degree is relatively low or when both the discount degree and the technology investment efficiency are relatively high, the supplier's optimal cooperation strategy with two manufacturers is to accept both manufacturers' technology investments and both manufacturers are also willing to invest simultaneously. At last, we extend the model to the asymmetric potential market size and show that our theoretical results are robust. [ABSTRACT FROM AUTHOR]