How to improve the key component's quality: the impact of overconfident manufacturer's R&D investment
Year: 2025
Type: article
Abstract: In EV supply chain, the key component's R&D cooperation between the manufacturer and tier 2 supplier is common. In this paper, we mainly explore the influences of the cross-echelon R&D cooperation and overconfidence on the key component's quality, price and manufacturer's and suppliers' profits. Assume that the supply chain is composed of one tier 2 supplier, one tier 1 supplier and one overconfident manufacturer, we present the wholesale price contract as a benchmark, then we give the two-part and equity cooperation contracts between the tier 2 supplier and the manufacturer. Additionally, we compare above three contracts and provide numerical examples. We find that (1) the overconfidence level of the manufacturer and the contract type jointly affect the the key component's quality and the profit of tier 1 supplier: when the overconfidence level is not very big or the manufacturer’s shareholding ratio is not very big, then the two-part contract is more helpful to improving the quality of the key component and tier 1 supplier's profit. Or else, the equity is better in improving key component's quality and tier 1 supplier's profit; (2) In theequity contract, tier 2 supplier could obtain more profit; but the manufacturer may gain more overestimated expected profit in two-part contract; (3) Under the two-part contract, manufacturer's overconfidence raises component's quality and profit of tier 1 supplier, but decreases profit of tier 2 supplier. In other two contracts, manufacturer's overconfidence will lead to a decline in key component's quality and tier 1 and 2 suppliers' profits.
Source: Operations Research Perspectives
Authors: Linghong Zhang, Huimin Pan
Language: English
Subfield: Management Information Systems
Domain: Social Sciences
Open Access status: gold
Estimated APC paid: $1,790
OpenAlex ID: W4409202271