Internet of Things Platform Service Supply Innovation: Exploring the Impact of Overconfidence

TL;DR

This paper models how manufacturers' overconfidence influences innovation, pricing, and profits in IoT supply chains, revealing that moderate overconfidence can enhance overall supply chain performance under different contracts.

Contribution

It introduces a game-theoretic model analyzing overconfidence effects on IoT supply chain collaboration, providing new insights into strategic decision-making and contract impacts.

Findings

Overconfidence affects innovation investments and profits in IoT supply chains.

Moderate overconfidence can lead to Pareto improvements in supply chain performance.

The impact of overconfidence varies with contract type and customer privacy sensitivity.

Abstract

This paper explores the impact of manufacturers' overconfidence on their collaborative innovation with platforms in the Internet of Things (IoT) environment by constructing a game model. It is found that in both usage-based and revenue-sharing contracts, manufacturers' and platforms' innovation inputs, profit levels, and pricing strategies are significantly affected by the proportion of non-privacy-sensitive customers, and grow in tandem with the rise of this proportion. In usage-based contracts, moderate overconfidence incentivizes manufacturers to increase hardware innovation investment and improve overall supply chain revenues, but may cause platforms to reduce software innovation; under revenue-sharing contracts, overconfidence positively incentivizes hardware innovation and pricing more strongly, while platform software innovation varies nonlinearly depending on the share ratio. Comparing the differences in manufacturers' decisions with and without overconfidence suggests that moderate overconfidence can lead to supply chain Pareto improvements under a given contract. This paper provides new perspectives for understanding the complex interactions between manufacturers and platforms in IoT supply chains, as well as theoretical support and practical guidance for actual business decisions.