Deteriorating product supply chains, particularly in the food and pharmaceutical industries, face critical challenges arising from the simultaneous deterioration of product quality and quantity, limited customer accessibility, and environmental uncertainties. This study investigates the impact of investment in Internet of Things (IoT) technologies on coordination, operational efficiency, and pricing decisions within a two echelon supply chain. Three decision making scenarios are developed: a non-cooperative Stackelberg structure, a cooperative coordination mechanism, and an IoT-based investment game. The proposed model analyzes the influence of technology intensity and the free-riding phenomenon on supply chain performance. The results indicate that targeted IoT investments, when supported by appropriate incentive mechanisms and equitable cost sharing schemes, significantly enhance productivity, coordination, and overall supply chain profitability. Conversely, neglecting the free-riding effect limits technology diffusion and poses a threat to the long term sustainability of the supply chain. Sensitivity analysis further reveals that the integrated optimization of physical deterioration control and digital enablement is the key strategic lever for improving efficiency and profitability in deteriorating product supply chains.
