Game analysis on collaborative quality innovation of supply chain based on Bertrand model

Quality is a key factor that affects the competence of supply chain, and collaborative quality innovation is an important way for a supply chain to improve its competence. However, a partner of the core enterprise in a supply chain may not have much incentive to innovate. In order to find an effective way to arouse the quality innovation enthusiasm of supply chain members, this paper adopts Bertrand model to analyze the utilities of a supply chain before and after its quality innovation and discusses the effect of product substitution on utility function. Then the paper gives a further analysis of the quality innovation behavior of supply chain members based on dynamic game. The equilibrium shows that quality innovation will bring the supply chain price and profit advantages, and if the core enterprise promises to innovate and permits its partners to participate in its quality innovation activities, the partners will innovate on their own initiatives.