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

2025-11-03

AI Summary

This study investigates how manufacturer overconfidence affects platform-enabled co-innovation in the Internet of Things (IoT) ecosystem. Method: We develop a game-theoretic model grounded in behavioral contract theory, comparing hardware/software innovation investments, pricing strategies, and profit allocation under usage-based versus revenue-sharing contracts. Contribution/Results: Moderate overconfidence incentivizes manufacturers to increase hardware innovation investment, enabling supply-chain Pareto improvements under specific contractual arrangements. The proportion of non-privacy-sensitive customers exerts heterogeneous effects on hardware versus software innovation. Platform software investment exhibits a nonlinear response to revenue-sharing rates. These findings provide a novel behavioral-contract-theoretic framework for understanding and governing manufacturer–platform collaboration in IoT ecosystems, offering actionable governance insights for platform governance and innovation policy.

Technology Category

• Game Theory and Economic Paradigms: Cooperative Game Theory
• Application Domains: Internet of Things, Sensor Networks & Smart Cities
• Multiagent Systems: Mechanism Design

Application Category

• Economics, Online Markets and Human Computation: The sharing economy
• Systems and Infrastructure for Web, Mobile and WoT: Energy management for devices in mobile Web and WoT environments
• Security and Privacy: Data transparency and provenance

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.

Problem

• Examining how manufacturer overconfidence affects IoT platform collaboration through game theory
• Analyzing how customer privacy sensitivity impacts innovation investment and pricing strategies
• Comparing contract types to determine when overconfidence benefits supply chain performance

Innovation

• Game model analyzes IoT manufacturer-platform collaboration
• Overconfidence affects innovation investment in contracts
• Moderate overconfidence enables supply chain Pareto improvements