Coordinating research and development efforts for quality improvement along a supply chain

Luca Lambertini ()

European Journal of Operational Research, 2018, vol. 270, issue 2, 599-605

Abstract: The optimal design of two-part tariffs is investigated in a dynamic model where two firms belonging to the same supply chain invest in R&D (research and development) activities to increase the perceived quality of the final product. It is shown that the replication of the vertically integrated monopolist’s performance can be attained using a two-part tariff in which the fee is a linear function of either the upstream R&D effort or product quality itself. The possibility of relying on R&D figures appearing in the upstream firm’s balance sheet is desirable as quality enhancement might not be observable or verifiable.

Keywords: OR in research and development; Product quality; Vertical separation; Vertical integration; Outsourcing (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:270:y:2018:i:2:p:599-605

DOI: 10.1016/j.ejor.2018.03.037

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