Game Analysis on the Interplay between Introduction of Store Brand by Retailer and Innovation Investment by Manufacturer

Abstract

This paper explores the impact of the upstream manufacturer’s innovation investment and the downstream retailer’s introduction of store brand products (SB) on supply chain members. Further we analyze the interplay between them. By formulating a decision model that includes a manufacturer and a retailer, applying the backward method, the equilibrium of supply chain members under different scenes is solved. The results show that the manufacturer’s innovation investment is its dominant strategy, it can increase the retail price of national brand products (NB) and realize the Pareto improvement. The introduction of SB by the retailer can lower both the retail price of NB and the level of innovation investment. Whether the retailer introduces SB depends on the cost of innovation investment. The manufacturer can prevent the retailer from introducing SB by reducing the cost of innovation investment.