Information Sharing in Procurement Contracting with Multiple Suppliers and Input Interdependencies

This paper analyzes a procurement situation where a manufacturer decides on sharing proprietary information with suppliers of complementary components when these components are commonly used for several products. I find that the interdependencies have profound impact on the manufacturer's information sharing strategy. The manufacturer may engage in selective information sharing, making demand or cost information accessible to one supplier but concurrently withholding the same information from a second, complementary input supplier. Information sharing to the second supplier is intermediate whereas concealment is two-tailed. Selective information sharing arises because in light of component interdependencies the disclosure strategy causes two competing forces – lowering one component's costs versus increasing the other's costs.