Abstract: The sharing of product upgrade costs by companies at the same level or upstream and downstream in the supply chain can reduce the company's innovation risks and increase the probability of successful product development, especially for scarce products. However, there is often the“free-riding” behavior in product development between companies, which affects their long-term cooperation. Therefore, how to encourage companies to choose joint investment is a problem that supply chain companies need to focus on. The capacity allocation strategy is studied that promotes manufacturers and retailers to choose joint investment in a dual-channel supply chain under the revenue-sharing cooperation mechanism. According to different profit matrices when manufacturers and retailers adopt different investment strategies, an evolutionary game model is established to compare the evolutionary stability strategies of the supply chain system when there is no cooperation mechanism and when the cooperation mechanism is introduced. It is shown that when there is no cooperation mechanism, the supply chain system will either stabilize on the strategy of one party’s investment and one party’s non-investment, or stabilize on the strategy of neither party’s investment; when the cooperation mechanism is introduced, the supply chain system will be stabilized on the strategy of mutual investment by both parties within a certain range of capacity allocation. Finally, the mathematical model is verified numerically through MATLAB, and the data of the calculation example meet the research assumptions. A revenue-sharing cooperation mechanism is proposed from the perspective of evolutionary game to improve the stability of long-term cooperation between enterprises and it helps expand the research on capacity allocation in the field of cost sharing.

Key words: dual-channel supply chain; capacity allocation; cost sharing; evolutionary game