Abstract: Considering that product quality is one of the key factors which affect consumer’ purchase behavior, the nonlinear consumer utility function, in the dual channel supply chain where the manufacturer is the leader of dynamic game and the retailer is the follower, is cited to analyze three different product quality R & D modes respectively, and the effects of various quality R & D modes on the profit and consumer utility of supply chain members are discussed alike. Subsequently, two-part tariff contract is used to coordinate the supply chain. There exist three product quality R & D modes including (i) product quality R & D not considered in the supply chain (ii) product quality R & D independently conducted by the manufacturer (iii) product quality R & D conducted by the manufacturer and the retailer alike. The results show that: (1) the wholesale price, retail price, direct selling price as well as product quality R & D level are improved when product quality R & D is carried out. Meanwhile, these values mentioned reach the maximum under mode iii, while the wholesale price, retail price, direct selling price and product quality R & D level are declined as the channel competition increases; (2) the sales volume in the traditional retail channel and online channel as well as consumer utility will be declined as the channel competition increases; (3) the profit of the manufacturer and consumer utility can be improved by product quality R & D. Meanwhile, these values mentioned reach the maximum under mode iii; as for the retailer, the profit will be motivated into the highest when the mode ii is used. Correspondingly, the lowest will be obtained when the mode iii is used; (4) in order to encourage the retailer to participate in R & D with the manufacturer, the two-part tariff contract is used to coordinate the supply chain. After coordination, the R & D level of products would be maintained as the level of that in mode iii along with the increasing of consumer utility. The numerical simulation is feasible as a tool to verify the validity of the model. Our research provides related ideas for enterprises to choose R & D mode moderately.

Key words: dual channel supply chain； consumer utility； product quality research and development； coordination