Abstract: A study is conducted on the strategy selection analysis of the manufacturer's investment in cost reduction or quality improvement and whether the E-commerce provides the historical price of the product. The supply chain structure of one manufacturer and one E-commerce supplier is considered, the equilibrium results are obtained by backwards induction method, and the influence of different strategy combinations on the manufacturer, E-commerce and supply chain is discussed. The results show that the manufacturer's cost reduction is always beneficial to the E-commerce. The E-commerce can increase the profit of the supply chain, consumer surplus and social welfare by offering the historical price on its own initiative, and the greater the reference price effect is, the greater the increase is. When the cost investment efficiency of the manufacturer is far lower than the quality improvement efficiency, the manufacturer chooses to improve product quality. As the quantity of quality improvement becomes larger, the E-commerce supplier will not provide the historical price.

Key words: cost reduction, quality improvement, R&D investment, reference price