Confidentiality and Information Sharing in Supply Chain Coordination
We consider information sharing in a decentralized supply chain where one manufacturer supplies to multiple retailers competing in price. Each retailer has some private information about the uncertain demand function which he may choose to disclose to the manufacturer. The manufacturer then sets a wholesale price based on the information received. The information exchange is said to be confidential if the manufacturer keeps the received information to herself, or nonconfidential if she discloses the information to some or all other retailers. Without confidentiality, information sharing is not possible because it benefits the manufacturer but hurts the retailers. With confidentiality, all parties have incentive to engage in information sharing if retail competition is intense. Under confidentiality, the retailers infer the shared information from the wholesale price and this gives rise to a signaling effect that makes the manufacturer's demand more price elastic, resulting in a lower equilibrium wholesale price and a higher supply chain profit. When all retailers share their information confidentially, they will truthfully report the information and the supply chain profit will achieve its maximum in equilibrium.
Volume (Year): 54 (2008)
Issue (Month): 8 (August)
|Contact details of provider:|| Postal: 7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA|
Web page: http://www.informs.org/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Carl Shapiro, 1986. "Exchange of Cost Information in Oligopoly," Review of Economic Studies, Oxford University Press, vol. 53(3), pages 433-446.
- Gérard P. Cachon & Martin A. Lariviere, 2001. "Contracting to Assure Supply: How to Share Demand Forecasts in a Supply Chain," Management Science, INFORMS, vol. 47(5), pages 629-646, May.
- Özalp Özer & Wei Wei, 2006. "Strategic Commitments for an Optimal Capacity Decision Under Asymmetric Forecast Information," Management Science, INFORMS, vol. 52(8), pages 1238-1257, August.
- George J. Mailath, 1989. "Simultaneous Signaling in an Oligopoly Model," The Quarterly Journal of Economics, Oxford University Press, vol. 104(2), pages 417-427.
- Andy A. Tsay, 1999. "The Quantity Flexibility Contract and Supplier-Customer Incentives," Management Science, INFORMS, vol. 45(10), pages 1339-1358, October.
- Martin A. Lariviere & Evan L. Porteus, 2001. "Selling to the Newsvendor: An Analysis of Price-Only Contracts," Manufacturing & Service Operations Management, INFORMS, vol. 3(4), pages 293-305, May.
- Esther Gal-or, 1986. "Information Transmission—Cournot and Bertrand Equilibria," Review of Economic Studies, Oxford University Press, vol. 53(1), pages 85-92.
- Daughety, Andrew F. & Reinganum, Jennifer F., 2007.
"Competition and confidentiality: Signaling quality in a duopoly when there is universal private information,"
Games and Economic Behavior,
Elsevier, vol. 58(1), pages 94-120, January.
- Andrew F. Daughety & Jennifer F. Reinganum, 2004. "Competition and Confidentiality: Signaling Quality in a Duopoly when there is Universal Private Information," Vanderbilt University Department of Economics Working Papers 0417, Vanderbilt University Department of Economics.
- Li, Lode., 1985.
"Cournot Oligopoly with Information Sharing,"
561, California Institute of Technology, Division of the Humanities and Social Sciences.
- Albert S. Kyle, 1989. "Informed Speculation with Imperfect Competition," Review of Economic Studies, Oxford University Press, vol. 56(3), pages 317-355.
- Sanford J. Grossman, 1981. "An Introduction to the Theory of Rational Expectations Under Asymmetric Information," Review of Economic Studies, Oxford University Press, vol. 48(4), pages 541-559.
- Lode Li, 2002.
"Information Sharing in a Supply Chain with Horizontal Competition,"
Yale School of Management Working Papers
ysm288, Yale School of Management.
- Lode Li, 2002. "Information Sharing in a Supply Chain with Horizontal Competition," Management Science, INFORMS, vol. 48(9), pages 1196-1212, September.
- Raith, Michael, 1996. "A General Model of Information Sharing in Oligopoly," Journal of Economic Theory, Elsevier, vol. 71(1), pages 260-288, October.
- Haim Mendelson & Tunay I. Tunca, 2007. "Strategic Spot Trading in Supply Chains," Management Science, INFORMS, vol. 53(5), pages 742-759, May.
- William Novshek & Hugo Sonnenschein, 1982. "Fulfilled Expectations Cournot Duopoly with Information Acquisition and Release," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 214-218, Spring.
- Terry A. Taylor, 2002. "Supply Chain Coordination Under Channel Rebates with Sales Effort Effects," Management Science, INFORMS, vol. 48(8), pages 992-1007, August.
- Richard N. Clarke, 1983. "Collusion and the Incentives for Information Sharing," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 383-394, Autumn.
- Fernando Bernstein & Awi Federgruen, 2005. "Decentralized Supply Chains with Competing Retailers Under Demand Uncertainty," Management Science, INFORMS, vol. 51(1), pages 18-29, January.
- Andrew F. Daughety & Jennifer F. Reinganum, 2002. "Informational Externalities in Settlement Bargaining: Confidentiality and Correlated Culpability," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 587-604, Winter.
- Hau L. Lee & Kut C. So & Christopher S. Tang, 2000. "The Value of Information Sharing in a Two-Level Supply Chain," Management Science, INFORMS, vol. 46(5), pages 626-643, May.
- Gérard P. Cachon & Martin A. Lariviere, 2005. "Supply Chain Coordination with Revenue-Sharing Contracts: Strengths and Limitations," Management Science, INFORMS, vol. 51(1), pages 30-44, January.
- Barry Alan Pasternack, 1985. "Optimal Pricing and Return Policies for Perishable Commodities," Marketing Science, INFORMS, vol. 4(2), pages 166-176.
- Vives, Xavier, 1984. "Duopoly information equilibrium: Cournot and bertrand," Journal of Economic Theory, Elsevier, vol. 34(1), pages 71-94, October.
When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:54:y:2008:i:8:p:1467-1481. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)
If references are entirely missing, you can add them using this form.