Information Sharing in a Supply Chain with a Common Retailer

We study the problem of information sharing in a supply chain with two competing manufacturers selling substitutable products through a common retailer. Our analysis shows that the retailer’s incentive to share information strongly depends on nonlinear production cost, competition intensity, and whether the retailer can offer a contract to charge a payment for the information. Without information contracting, the retailer has an incentive to share information for free when production economy is large but has no incentive to do so when there is production diseconomy. With information contracting, the retailer has an incentive to share information when either production diseconomy/economy is large or competition is intense. We characterize the conditions under which the retailer shares information with none, one, or both of the manufacturers. We also show that the retailer prefers to sell information sequentially rather than concurrently to the manufacturers, whereas the manufacturers’ preferences are reversed.

This paper was accepted by Yossi Aviv, operations management.