Proactive or reactive? Quality improvement strategies in a Co-opetitive supply chain

In a co-opetitive supply chain where the manufacturer competes with the retailer via direct sales, the two parties may have divergent trade-offs regarding quality decision authority. This study examines these decision incentives and co-opetition dynamics through a bilateral negotiation framework, analyzing two scenarios: Scenario R, where the retailer makes quality decisions with the manufacturer as the reactive party, and Scenario P, where the manufacturer proactively maintains quality decision authority. Our analysis reveals that it is not always necessary for the manufacturer to invest more in improving product quality based on the retailer’s decision. Interestingly, holding the quality decision authority is not necessarily the optimal strategy for the retailer. Specifically, a retailer with strong bargaining power only benefits from quality decision authority when the manufacturer’s development efficiency is either high or low, but not in the moderate range. Furthermore, once the preferences of both the retailer and manufacturer align, a win-win situation can be achieved. Finally, we relax assumptions and extend the analysis to demonstrate the robustness of our findings.