Service provision decisions of competitive manufacturers: From service spillover perspective

This paper investigates competing manufacturers’ strategic choice of service provision in a two-level supply chain composed two manufacturers and one common retailer. Our results indicate that the strategy that two competing manufacturers provide services is always the dominant choice, and two competing manufacturers could have the highest profit in that case. But when only one of them provides services, the result is related to the potential market size, the unit service cost coefficient and the service spillover intensity. Finally, through the cost sharing and quantity competition extensions, we find the Pareto regions of cost sharing under the equilibrium strategy, and there will be multiple Nash equilibrium regions under the quantity competition.