Information Sharing in a Supply Chain with a Common Retailer

15 December 2012 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 consider several scenarios with the manufacturers facing either production diseconomy or economy, and the retailer offering information contracts either concurrently or sequentially to the manufacturers. When there is no information contracting, the retailer may have an incentive to share information for free when there is production economy but not diseconomy. A manufacturer always benefits from receiving information except when production economy is large and the rival manufacturer also has the information. When there is information contracting, the retailer has an incentive to share information when either production diseconomy/economy is large or competition is more intense. Information contracting always benefits the retailer, and the benefit is larger when she offers contracts sequentially rather than concurrently to the manufacturers. The manufacturers’ preferences are reversed. The retailer’s profit may increase when production diseconomy becomes larger, and the manufacturers’ total profit may increase when there is production economy and competition becomes more intense. Neither of these is possible when there is no information sharing.