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The manufacturer purchases a component from the supplier and then transforms it into a final product which is sold in a price and quality sensitive market. The manufacturer considers to make R\\&D investment to improve the product quality and reduce the production cost. We first investigate and derive the optimal investment strategy and pricing decisions by establishing a three-stage game model. We show that the optimal investment strategy and pricing decisions in the decentralized model may deviate from those in the centralized model. We then propose a mechanism to coordinate the decentralized supply chain, by introducing a profit sharing policy, a production cost sharing policy, and an investment cost sharing policy. 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