A joint analysis of vertical and horizontal information disclosure in a supply chain

We study the interplay between vertical information acquisition and horizontal information sharing strategy in a two-echelon supply chain comprising a manufacturer and two retailers. We investigate the effect of market variation and product substitutability on information acquisition and sharing. The study shows that retailers lack incentives to disclose information to the manufacturer voluntarily under conditions of low demand variation when retailers engage in Bertrand and Cournot competition, while the retailers benefit from partial information acquisition if demand variation is high. We also explore the scenarios where information acquisition is feasible when it benefits the overall supply chain. Specifically, when market variation is intermediate, the manufacturer can incentivize both retailers to share information by offering profit-sharing arrangements under Cournot competition. However, under price competition, the manufacturer can only purchase partial retailers’ information under intermediate product substitutability and market variation, or under high market variation. Moreover, we show that market variation, boundary equilibrium, and competition mode (Cournot vs. Bertrand) play a significant role in determining whether competing retailers will share information with each other. While previous literature indicates that Cournot-competing retailers never voluntarily share information without boundary equilibria, we show that this outcome may change when some solutions of retailers’ order quantities are binding at zero. Finally, the manufacturer’s information acquisition and retailers’ information sharing strategies may conflict with the interests of the supply chain.