Research On The Upstream Innovation Decision In A Supply Chain Based On Overconfidence

With the progress of science and technology and the development of the times,upstream innovation of supply chain has gradually become the core competitiveness of enterprises.Overconfidence is one of the most common and pervasive cognitive biases in decision-making,and has been widely recognized as an important influential factor that should be taken into consideration in operations management paradigm.How overconfidence affects the decision-making of supply chain member in the process of upstream innovation has become an important research proposition.According to the decision-making relationship between the upstream and downstream enterprises of the supply chain and the different types of innovation incentive contract,this paper constructs the upstream innovation model of the supply chain with overconfident,and solves the equilibrium innovation level,optimal pricing and actual profit.Through the comparative analysis of the decision variables,the influence of overconfidence on supply chain decision-making and the best incentive contract choice under different incentive contracts is analyzed.The study found that:(1)The cost-sharing contract can encourage the supplier to invest in innovation in the case of overconfident manufacturer;when the supplier is overconfident,the level of innovation will increase accordingly no matter what kind of contract.(2)In terms of manufacturer's profits,when the manufacturer is overconfident,the profits all decrease with the increase in overconfidence;but when the supplier is overconfident,the profits all increase.(3)In terms of supplier's profits,regardless of whether the manufacturer or supplier has overconfidence,the revenue-sharing contract is the best choice,but the suboptimal contract is not necessarily a cost-sharing contract.Our results shed some insights on overconfidence bias in operations management and provide practical decision-making advice for supply chain members.