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We consider the problem of sharing retailer's demand information in a supply chain with two competing manufacturers selling substitutable products through a common retailer. We examine several scenarios with either the retailer or the manufacturers as leaders in offering information (sharing) contracts. We show that a larger production diseconomy or higher competition intensity induces more information sharing. The retailer may benefit from a larger production diseconomy, which is not possible without information contracting. Information contracting always benefits the retailer, and the benefit is larger when she offers contracts sequentially rather than simultaneously to the manufacturers. Information contracting benefits the manufacturers only when they offer the contracts and production diseconomy is large. When either demand uncertainty or production diseconomy is large, the retailer invests more in improving information accuracy. When competition is more intense, she invests more except under some conditions that we fully characterize.
Bibliographical noteThe authors thank the department editor, the associate editor, and three anonymous reviewers, as well as the seminar participants at University of Miami, National University of Singapore, Singapore Management University, Chinese University of Hong Kong, Fudan University, Shanghai Jiao Tong University, Nanjing University, and Sun Yat-Sen University for thoughtful comments and suggestions. Financial support was provided by Wei Lun Foundation and the Research Grants Council of Hong Kong [Projects LU13501414 and HKUST641212].
- supply chain management; common retailer; incentive; information sharing; nonlinear production cost; manufacturer competition
- common retailer
- information sharing
- nonlinear production cost
- manufacturer competition