In this paper, we develop a dynamic model of collaboration between a manufacturer and its supplier, where the fundamental issue for each of them is how to allocate its resources between improving an existing product and developing a new one. We first study the optimal path of efforts allocation for each player in a non-cooperative setting, and then look into a cooperative setting. We finally conduct a numerical analysis and observe how the optimal dynamics of key variables change as initial configurations of the fame vary.
KIM, B. and EL OUARDIGHI, F. (2003). Supplier-manufacturer Collaboration on New Product Development. ESSEC Business School.