Analysis of Optimal Strategies in a Two-Echelon Digital Products Supply Chain Considering Consumer Types

Considering that the consumers are heterogeneous, we analyze pricing and investment strategies in a two-echelon supply chain of digital products which comprises a manufacturer and a retailer. Firstly, we construct demand function of digital product based on the consumer types by introducing product quality. Three different supply chain models are considered: vertical integration model, Cournot model, and manufacturer Stackelberg model. We study the players’ optimal strategies under these three models and focus on analyzing the effects of the players’ power balance on equilibrium optimal pricing and investment. We find the aggregated profits of both sides and investment cost are the highest in vertical integration model. The price of the digital product is the lowest in vertical integration model in most cases, as the customers hope. Finally, we offer managerial implications and direct the further work.