Pricing and Coordination Strategy of Product Service Supply Chain Under Digital Transformation

Abstract

Digitalization is now playing an empowering role in the process of servitization, which changes the approach to product and service delivery for service-oriented manufacturers (SM) and sales service integrators (SSI). However, few studies concentrate on the pricing and coordination of the product service supply chain (PSSC) under digital transformation. The purpose of the study is to explore how digitalization supports servitization and enables value co-creation among stakeholders in the supply chain by influencing pricing decisions. We take the automobile manufacturing industry as an example, and construct a two-stage Stackelberg game model of PSSC considering the product network externality and service digitalization level. The optimal pricing strategies under centralized and decentralized decisions are given, and the coordination contract of PSSC is designed. The results show that the optimal values of variables in the digital environment are higher in general than in the non-digital environment. The emphasis of SM on digitalization is positively related to the product network externality, the service delivery advantage, the digitalization level, and the profit of advanced services. We also find that basic and advanced services of SSI are gradually losing the potential to create value, whereas the advanced service of SM continues to generate higher profits. Service delivery advantages of SM and SSI can enhance the profitability of advanced services. The dual revenue-sharing contract can realize the coordination of PSSC. The results contribute to related studies on digitalization, servitization, as well as pricing and coordination in the product service supply chain.