Information Sharing in a Supply Chain with Asymmetric Competing Retailers

Abstract

We study the information sharing in a supply chain of a manufacturer selling to two asymmetric retailers engaged in inventory competition. The dominant retailer has strong bargaining power and market power, which means that it enjoys a lower wholesale price and can obtain part of the unmet demand transferred from the weak retailer. The manufacturer offers a wholesale price to the weak retailer. As the weak retailer’s private demand information is unknown to the other participants, whether to share the information to other players become an important issue. We develop a game-theoretic model to examine four information-sharing formats: no information sharing, only sharing with the dominant retailer, only sharing with the manufacturer, and full information sharing. We obtain the equilibrium profits and decisions under the four sharing formats and investigate the firms’ preferences regarding these formats. We find that the weaker retailer prefers not sharing information and only sharing information with the dominant retailer formats, since these two formats lower the wholesale price and increase the weak retailer’s order quantity. The dominant retailer prefers full information sharing to only sharing with the dominant retailer because the former format increases the manufacturer’s wholesale price to the weaker retailer, thereby improving the dominant retailer’s total demand. This study also provides a theoretical basis for the application of advanced information technology in the supply chain.