Abstract: Under the new circumstance with intense competition, the enterprise should balance the relationship between the price and the quality, coordinating its chain members' decision-making to develop the optimally competitive strategy with the full consideration of the behavior of competitors. And it will not meet the need of operational decision making if only the price or the quality are considered. The article examines such questions in a dynamic game of a supply chain system consisting two suppliers and a manufacturer. And it analyzes the equilibriums in four different scenarios, namely, chain cooperating, supplier cooperating, supplier non-cooperating and mixed cooperating; and the impact of price and quality competition exertang on final decision-making such as retail price, quality effort and profit is discussed. The results show that cooperation of suppliers can contribute to quality improvement but it may lead to profit reduction of the whole chain. In most situations, the more intense the quality competition is, the more effort the suppliers make, especially in the cooperative situation. However, the influence of price competition on supplier's quality effort is bounded or even can be ignored.

Key words: supply chain, quality effort, price, competition, coordination strategy