Two essays on information sharing in supply chains

Abstract

This thesis presents two essays that investigate the incentives for information sharing for supply chains under horizontal competition and asymmetric information. The first essay studies the incentive for information sharing when retailers have private demand information. We consider a model of two competing supply chains each consisting of one manufacturer and one retailer. The manufacturers take efforts in cost reduction. The retailers engage in either the Cournot or the Bertrand competition. Information sharing improves the cost reduction decisions, and it makes the double marginalization effect of linear wholesale price weaker when cost of effort is small and stronger otherwise. When cost of effort is low, information sharing improves the cost reduction decision and weakens the double marginalization effect, hence the retailers share information voluntarily, which is not possible when the manufacturers do not take efforts in cost reduction. When cost of effort is not low, information sharing makes the double marginalization effect stronger. In this case, only when the bene fit of improved cost reduction decisions outweighs the damaging effect of stronger double marginalization and there is a side payment, the retailers shares information with the manufacturers. In the Cournot model, we show that it is more likely to have information sharing when either the cost of effort is low, the information is less accurate, or competition is less intense. In the Bertrand model, it is more likely to have information sharing when the cost of effort is small, the information is more accurate and the competition is more intense. The second essay studies the incentive for information sharing when the manufacturer has superior demand information. We consider a supply chain with a manufacturer offering a revenue sharing contract to two retailers who engage in either (1) Cournot competition where they compete in service effort and quantity, or (2) Bertrand competition where they compete in service effort and price. When the manufacturer 's share of the revenue is given, we show that the manufacturer always has an incentive to share information with one or both retailers. She prefers sharing information with both retailers when her share of the revenue is large, cost of effort is large, effort competition is less intense, quantity competition in less intense or price competition is more intense. The only exception is when the retailers compete in quantity and the competition is intense, the manufacturer prefers partial information sharing regardless of the revenue sharing rate. Based on a numerical study, we investigate how the manufacturer 's optimal share of revenue depends on key parameters such as cost of effort, competition intensity and demand variability.

Date of Award	2013
Original language	English
Awarding Institution	The Hong Kong University of Science and Technology