Product Pricing And Design Strategy In Platform-Based Collaborative Innovation

Advances in information and flexible manufacturing technologies have greatly facilitated the participation of multiple players in collaborative innovation.Collaborative innovation,a new business model that requires platform enterprises,manufacturers,and even consumers to participate in product research and development,has become increasingly popular in recent years.Simultaneously,technological advances in platforms have provided a convenient channel for consumers to contribute creative ideas in co-creation activities,providing an opportunity to rebuild business models.In this dissertation,we consider a setting where a platform enterprise,a manufacturer,and a group of consumers jointly design and produce a co-created product.Specifically,in Chapter 3,this dissertation first considers the product design and pricing strategies for platform-based collaborative innovation from the perspective of fully rational decision-makers.Secondly,in Chapter 4,this dissertation considers the impact of decision-makers’ overconfidence cognitive bias on the collaborative innovation process.Chapters 3 and 4 focus on interfirm(the platform enterprise and manufacturer)collaborative innovation,adopting the setting that consumer effort is exogenously given.Finally,in Chapter 5,this dissertation analyzes the impact of endogenous consumer effort on all decision-makers involved in collaborative innovation.Firstly,Chapter 3 focuses on the product design decision of the platform enterprise and the pricing decision of the manufacturer based on the assumption of fully rational decision-makers.In the process of collaborative innovation,the platform enterprise integrates consumer ideas and decides on product design(i.e.,either an aesthetic-oriented or a functionality-oriented product design),then sells the product design to the manufacturer who produces the corresponding new products and sells them in the market.This chapter focuses on inter-firm collaborative innovation,where consumer effort decisions(i.e.,contributing product design ideas)are exogenously given.We find that both types of product design can be equilibrium strategies,even if the value brought by functional attributes is three times that brought by aesthetic attributes.Intuitively,collaborative innovation between the platform enterprise and manufacturer has a positive impact on their profits.However,our results show that due to information costs,collaborative innovation may reduce the profits of both the platform enterprise and manufacturer when the product value is above a certain threshold.In addition,when consumer utility is influenced by the purchasing decisions of other consumers,it may lead to a win-win situation where the profits of both the platform enterprise and the manufacturer increase,but it may also lead to a lose-lose situation.Secondly,Chapter 4 examines the impact of decision-makers’ overconfidence bias on the collaborative innovation process.The Study from the Wharton School has shown that decision-makers in collaborative activities tend to be overconfident in their estimates.Therefore,this chapter analyzes the impact of overconfidence on the platform enterprise’s product design and charging decisions and manufacturers’ corresponding pricing decisions in collaborative innovation and analyzes how it affects the profits of the platform enterprise and manufacturer.We find that when the product value is relatively high,the platform enterprise chooses an aesthetic-oriented product design,and when the product value is relatively low,the platform enterprise chooses a functionalityoriented product design.Furthermore,our results show that overconfidence can make the platform enterprise change its product desi gn strategy from aesthetic-oriented in the unbiased scenario to functionality-oriented in the overconfident scenario.Previous studies have shown that overconfidence bias can lead to a decrease in decision-makers’ profits.But,our results show that overconfidence can be a positive force for collaborative innovation and even lead to a win-win-win situation for the platform,manufacturer,and consumer.We show that overconfidence can make the platform change its product design strategy from aesthetic-oriented in the unbiased scenario to functionality-oriented in the biased scenario.Furthermore,we find two opposite drivers at play in the impact of overconfidence on decision-makers’ profit.One driver is the negative influence of self-overconfidence on the equilibrium profit;the second driver is the positive influence of the other decision-maker’s overconfidence on its profit.The ultimate impact of overconfidence on decision-makers’ profits depends on the relative strength of these two drivers.Finally,Chapter 5 examines the impact of endogenous consumer effort decisions and analyses on the collaborative innovation process by establishing a four-stage sequential game to describe the interaction among consumers,the platform enterprise,and the manufacturer.Unlike the analysis where consumer effort decisions are exogenously given,Chapter 5 considers consumer effort decisions made at the initial stage,and heterogeneous consumers participating in collaborative innovation are divided into two categories:aesthetic-oriented and functionality-oriented innovation consumers.The platform enterprise sets three product designs to cover the needs of different consumers:functionality-oriented,aesthetic-oriented,and mixed product design.Our results show that each of these three product designs has its own range of applicability,and there is no strictly dominant product design.Secondly,our results show that the relationship between the two types of consumers in making effort decisions is complementary rather than substitutive in terms of value creation.The existing study has shown that coordinating upstream and downstream enterprises through revenue-sharing contracts involves the upstream enterprise charging positive unit fees to the downstream enterprise.However,we arrive at different results from this,as when the platform enterprise uses revenue-sharing contracts to coordinate with the manufacturers.Our results show that the downstream enterprise(i.e.,manufacturer)does not need to pay for the integrated product design provided by the upstream enterprise(i.e.,platform enterprise).However,the upstream enterprise will provide subsidies to the downstream enterprise to achieve coordination.