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Value of information in a mobile app supply chain under hidden or known information superiority

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  • Avinadav, Tal
  • Levy, Priel

Abstract

We introduce a game-theoretic analysis of a supply chain in the mobile app industry consisting of a distribution platform and an app developer. The app's demand is uncertain and estimated by the same distribution function for both parties. The platform can substantially reduce the uncertainty associated with the base demand using accumulated data of similar apps distributed via its portal, and decide whether to disclose this information to the developer. Two scenarios are investigated: hidden superiority, where the information status of the platform is non-transparent; and known superiority, where it is transparent. We show that: (a) under hidden superiority: (i) the platform should disclose its private information only when demand forecast is pessimistic; (ii) the platform always benefits from knowing the exact value of the base demand, while the developer may either lose or benefit from the platform's knowledge; (b) under known superiority: (i) the developer gains valuable knowledge about the base demand using a Bayesian update, so the platform always has to disclose its private information; (ii) both parties benefit from the platform's knowledge. While it is clear that for the platform hidden superiority is always better than known superiority, we find that counter-intuitively, for the developer, hidden superiority may be preferable over known superiority. Furthermore, for each scenario, we investigate the value of information and the effect of demand volatility. We further examine the effect of the identity of the more informed party on the supply-chain measures and parties' profits at equilibrium.

Suggested Citation

  • Avinadav, Tal & Levy, Priel, 2022. "Value of information in a mobile app supply chain under hidden or known information superiority," International Journal of Production Economics, Elsevier, vol. 248(C).
    • Handle: RePEc:eee:proeco:v:248:y:2022:i:c:s0925527322000603
    DOI: 10.1016/j.ijpe.2022.108467
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