IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2511.01332.html

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

Author

Listed:
  • Xiufeng Li
  • Zefang Li

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.

Suggested Citation

  • Xiufeng Li & Zefang Li, 2025. "Internet of Things Platform Service Supply Innovation: Exploring the Impact of Overconfidence," Papers 2511.01332, arXiv.org.
    • Handle: RePEc:arx:papers:2511.01332
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/2511.01332
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Michael D. Grubb, 2015. "Overconfident Consumers in the Marketplace," Journal of Economic Perspectives, American Economic Association, vol. 29(4), pages 9-36, Fall.
    2. Hui Zhou & Lu Liu & Weifan Jiang & Shengsheng Li & Jen-Chih Yao, 2022. "Green Supply Chain Decisions and Revenue-Sharing Contracts under Manufacturers’ Overconfidence," Journal of Mathematics, Hindawi, vol. 2022, pages 1-11, June.
    3. Michael D. Grubb, 2009. "Selling to Overconfident Consumers," American Economic Review, American Economic Association, vol. 99(5), pages 1770-1807, December.
    4. Jaspers, Esther D.T. & Pearson, Erika, 2022. "Consumers’ acceptance of domestic Internet-of-Things: The role of trust and privacy concerns," Journal of Business Research, Elsevier, vol. 142(C), pages 255-265.
    5. Du, Xianjin & Zhan, Huimin & Zhu, Xiaoxuan & He, Xiuli, 2021. "The upstream innovation with an overconfident manufacturer in a supply chain," Omega, Elsevier, vol. 105(C).
    6. Haaker, Timber & Ly, Pham Thi Minh & Nguyen-Thanh, Nhan & Nguyen, Hanh Thi Hong, 2021. "Business model innovation through the application of the Internet-of-Things: A comparative analysis," Journal of Business Research, Elsevier, vol. 126(C), pages 126-136.
    7. Santoro, Gabriele & Vrontis, Demetris & Thrassou, Alkis & Dezi, Luca, 2018. "The Internet of Things: Building a knowledge management system for open innovation and knowledge management capacity," Technological Forecasting and Social Change, Elsevier, vol. 136(C), pages 347-354.
    8. Wei Lu & Yu Jiang & Panpan Xia & Zhimin Huang, 2023. "How retailer overconfidence affects supply chain transparency with manufacturer encroachment," Annals of Operations Research, Springer, vol. 329(1), pages 1149-1174, October.
    9. Can Sun & Yonghua Ji, 2022. "For Better or For Worse: Impacts of IoT Technology in e‐Commerce Channel," Production and Operations Management, Production and Operations Management Society, vol. 31(3), pages 1353-1371, March.
    10. Meng Li, 2019. "Overconfident Distribution Channels," Production and Operations Management, Production and Operations Management Society, vol. 28(6), pages 1347-1365, June.
    11. Rossi, Federica & Caloffi, Annalisa & Colovic, Ana & Russo, Margherita, 2022. "New business models for public innovation intermediaries supporting emerging innovation systems: The case of the Internet of Things," Technological Forecasting and Social Change, Elsevier, vol. 175(C).
    12. Joseph R. Radzevick & Don A. Moore, 2011. "Competing to Be Certain (But Wrong): Market Dynamics and Excessive Confidence in Judgment," Management Science, INFORMS, vol. 57(1), pages 93-106, January.
    13. Jun Pei & Ping Yan & Subodha Kumar, 2023. "No Permanent Friend or Enemy: Impacts of the IIoT-Based Platform in the Maintenance Service Market," Management Science, INFORMS, vol. 69(11), pages 6800-6817, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chen, Xin & Xu, Weijun & Wu, Meng, 2024. "Newsvendor overconfidence and advertising," Omega, Elsevier, vol. 126(C).
    2. Jiajun He & Yiming Zhao & Beijia Zhang & Lin Chen & Xiuxiu Ma, 2025. "The Impact of Blockchain Technology on Green Investment Decisions for a Sustainable Supply Chain with an Overconfident Manufacturer," Sustainability, MDPI, vol. 17(1), pages 1-32, January.
    3. Jinhan Yu & Licheng Sun, 2022. "Supply Chain Emission Reduction Decisions, Considering Overconfidence under Conditions of Carbon Trading Price Volatility," Sustainability, MDPI, vol. 14(22), pages 1-18, November.
    4. Michael Grubb, 2015. "Failing to Choose the Best Price: Theory, Evidence, and Policy," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 47(3), pages 303-340, November.
    5. Yang, Haoxiong & Liu, Yang & Zhang, Xiaoju, 2025. "Supply chain coordination of counter-seasonal fresh produce under the farmer’s overconfidence," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 202(C).
    6. Michael Grubb, 2015. "Behavioral Consumers in Industrial Organization: An Overview," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 47(3), pages 247-258, November.
    7. Masahiro Watabe, 2016. "A characterization of implementability of decision rules via a menu of three-part tariffs," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 6(3), pages 459-479, December.
    8. Jain, Tarun & Hazra, Jishnu & Cheng, T.C.E., 2018. "Sourcing under overconfident buyer and suppliers," International Journal of Production Economics, Elsevier, vol. 206(C), pages 93-109.
    9. Malmendier, Ulrike & Szeidl, Adam, 2020. "Fishing for fools," Games and Economic Behavior, Elsevier, vol. 122(C), pages 105-129.
    10. Li, Xiufeng & Li, Lei & Ma, Shaojun, 2025. "Identifying the role of contracts in driving value cocreation between the internet of things platform and smart product manufacturer," Technovation, Elsevier, vol. 140(C).
    11. Jammernegg, Werner & Kischka, Peter & Silbermayr, Lena, 2026. "Supply chain coordination with a wholesale price contract for behavioral decision-makers," European Journal of Operational Research, Elsevier, vol. 329(1), pages 112-123.
    12. Ran I. Shorrer & Sandor Sovago, 2017. "Obvious Mistakes in a Strategically Simple College Admissions Environment," Tinbergen Institute Discussion Papers 17-107/V, Tinbergen Institute.
    13. Chen, Jiawei & Jiang, Lai & Syed Shah, Saad Andalib, 2022. "An empirical model of the effects of “bill shock” regulation in mobile telecommunication markets," International Journal of Industrial Organization, Elsevier, vol. 83(C).
    14. Christos Genakos & Costas Roumanias & Tommaso Valletti, 2015. "Loss Aversion on the Phone," CEP Discussion Papers dp1373, Centre for Economic Performance, LSE.
    15. McGowan, Féidhlim, 2018. "The roaming regulation and the case for applying behavioural industrial organisation to EU competition policy," Papers WP598, Economic and Social Research Institute (ESRI).
    16. Liu, Jie & Yang, Yang & Yu, Yugang, 2021. "Ordering and interest rate strategies in platform finance with an overconfident and commerce retailer," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 153(C).
    17. Zhen Chen & Kaveh Khalilpour & Liangshan Shao & Rui Zhao & Xintong Li & Qingzhen Yao, 2026. "Pricing and coordination in green supply chains: The impact of overconfident retailers under reference price effect," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 28(1), pages 2459-2481, January.
    18. Kopel, Michael & Ramani, Vinay, 2024. "The bright side of the planning fallacy in distribution channels," European Journal of Operational Research, Elsevier, vol. 314(2), pages 540-551.
    19. Yan, Xiaoyu & Liu, Weihua & Tang, Ou & Hou, Jiahe, 2024. "When will an overconfident entrant in the two-sided market do more good than harm?," International Journal of Production Economics, Elsevier, vol. 267(C).
    20. Byrne, David P. & Martin, Leslie A., 2021. "Consumer search and income inequality," International Journal of Industrial Organization, Elsevier, vol. 79(C).

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2511.01332. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.