IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v57y2011i3p566-581.html
   My bibliography  Save this article

Sharing Demand Information in Competing Supply Chains with Production Diseconomies

Author

Listed:
  • Albert Y. Ha

    (School of Business and Management, Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong)

  • Shilu Tong

    (Australian School of Business, University of New South Wales, Sydney, New South Wales 2052, Australia)

  • Hongtao Zhang

    (School of Business and Management, Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong)

Abstract

This paper studies the incentive for vertical information sharing in competing supply chains with production technologies that exhibit diseconomies of scale. We consider a model of two supply chains each consisting of one manufacturer selling to one retailer, with the retailers engaging in Cournot or Bertrand competition. For Cournot retail competition, we show that information sharing benefits a supply chain when (1) the production diseconomy is large and (2) either competition is less intense or at least one retailer's information is less accurate. A supply chain may become worse off when making its information more accurate or production diseconomy smaller, if such an improvement induces the firms in the rival supply chain to cease sharing information. For Bertrand retail competition, we show that information sharing benefits a supply chain when (1) the production diseconomy is large and (2) either competition is less intense or information is more accurate. Under Bertrand competition a manufacturer may be worse off by receiving information, which is never the case under Cournot competition. Information sharing in one supply chain triggers a competitive reaction from the other supply chain and this reaction is damaging to the first supply chain under Cournot competition but may be beneficial under Bertrand competition. This paper was accepted by Martin Lariviere, operations management.

Suggested Citation

  • Albert Y. Ha & Shilu Tong & Hongtao Zhang, 2011. "Sharing Demand Information in Competing Supply Chains with Production Diseconomies," Management Science, INFORMS, vol. 57(3), pages 566-581, March.
    • Handle: RePEc:inm:ormnsc:v:57:y:2011:i:3:p:566-581
    DOI: 10.1287/mnsc.1100.1295
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.1100.1295
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.1100.1295?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. K. Sridhar Moorthy, 1988. "Strategic Decentralization in Channels," Marketing Science, INFORMS, vol. 7(4), pages 335-355.
    2. Anne T. Coughlan & Birger Wernerfelt, 1989. "On Credible Delegation by Oligopolists: A Discussion of Distribution Channel Management," Management Science, INFORMS, vol. 35(2), pages 226-239, February.
    3. 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.
    4. Lode Li & Hongtao Zhang, 2008. "Confidentiality and Information Sharing in Supply Chain Coordination," Management Science, INFORMS, vol. 54(8), pages 1467-1481, August.
    5. 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.
    6. Mollick, Andre Varella, 2004. "Production smoothing in the Japanese vehicle industry," International Journal of Production Economics, Elsevier, vol. 91(1), pages 63-74, September.
    7. Vives, Xavier, 1984. "Duopoly information equilibrium: Cournot and bertrand," Journal of Economic Theory, Elsevier, vol. 34(1), pages 71-94, October.
    8. Lode Li, 1985. "Cournot Oligopoly with Information Sharing," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 521-536, Winter.
    9. Gal-Or, Esther, 1985. "Information Sharing in Oligopoly," Econometrica, Econometric Society, vol. 53(2), pages 329-343, March.
    10. Timothy W. McGuire & Richard Staelin, 1983. "An Industry Equilibrium Analysis of Downstream Vertical Integration," Marketing Science, INFORMS, vol. 2(2), pages 161-191.
    11. Lode Li, 2002. "Information Sharing in a Supply Chain with Horizontal Competition," Management Science, INFORMS, vol. 48(9), pages 1196-1212, September.
    12. Krishnan S. Anand & Haim Mendelson, 1997. "Information and Organization for Horizontal Multimarket Coordination," Management Science, INFORMS, vol. 43(12), pages 1609-1627, December.
    13. Griffin, James M, 1972. "The Process Analysis Alternative to Statistical Cost Functions: An Application to Petroleum Refining," American Economic Review, American Economic Association, vol. 62(1), pages 46-56, March.
    14. Eichenbaum, Martin, 1989. "Some Empirical Evidence on the Production Level and Production Cost Smoothing Models of Inventory Investment," American Economic Review, American Economic Association, vol. 79(4), pages 853-864, September.
    15. Hyoduk Shin & Tunay I. Tunca, 2010. "Do Firms Invest in Forecasting Efficiently? The Effect of Competition on Demand Forecast Investments and Supply Chain Coordination," Operations Research, INFORMS, vol. 58(6), pages 1592-1610, December.
    16. Ehud Kalai & Morton I. Kamien & Michael Rubinovitch, 1992. "Optimal Service Speeds in a Competitive Environment," Management Science, INFORMS, vol. 38(8), pages 1154-1163, August.
    17. Pradeep Bhardwaj, 2001. "Delegating Pricing Decisions," Marketing Science, INFORMS, vol. 20(2), pages 143-169, September.
    18. Fuqiang Zhang, 2006. "Competition, Cooperation, and Information Sharing in a Two-Echelon Assembly System," Manufacturing & Service Operations Management, INFORMS, vol. 8(3), pages 273-291, March.
    19. Albert Y. Ha & Shilu Tong, 2008. "Contracting and Information Sharing Under Supply Chain Competition," Management Science, INFORMS, vol. 54(4), pages 701-715, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Weixin Shang & Albert Y. Ha & Shilu Tong, 2016. "Information Sharing in a Supply Chain with a Common Retailer," Management Science, INFORMS, vol. 62(1), pages 245-263, January.
    2. Li Jiang & Zhongyuan Hao, 2016. "Incentive-Driven Information Dissemination in Two-Tier Supply Chains," Manufacturing & Service Operations Management, INFORMS, vol. 18(3), pages 393-413, July.
    3. Li, Tian & Zhang, Hongtao, 2015. "Information sharing in a supply chain with a make-to-stock manufacturer," Omega, Elsevier, vol. 50(C), pages 115-125.
    4. Hyoduk Shin & Tunay I. Tunca, 2010. "Do Firms Invest in Forecasting Efficiently? The Effect of Competition on Demand Forecast Investments and Supply Chain Coordination," Operations Research, INFORMS, vol. 58(6), pages 1592-1610, December.
    5. Li, Xiaojing & Chen, Jing & Ai, Xingzheng, 2019. "Contract design in a cross-sales supply chain with demand information asymmetry," European Journal of Operational Research, Elsevier, vol. 275(3), pages 939-956.
    6. Noam Shamir & Hyoduk Shin, 2016. "Public Forecast Information Sharing in a Market with Competing Supply Chains," Management Science, INFORMS, vol. 62(10), pages 2994-3022, October.
    7. Albert Y. Ha & Quan Tian & Shilu Tong, 2017. "Information Sharing in Competing Supply Chains with Production Cost Reduction," Manufacturing & Service Operations Management, INFORMS, vol. 19(2), pages 246-262, May.
    8. Guangwen Kong & Sampath Rajagopalan & Hao Zhang, 2013. "Revenue Sharing and Information Leakage in a Supply Chain," Management Science, INFORMS, vol. 59(3), pages 556-572, November.
    9. Shamir, Noam, 2012. "Strategic information sharing between competing retailers in a supply chain with endogenous wholesale price," International Journal of Production Economics, Elsevier, vol. 136(2), pages 352-365.
    10. Daozhi Zhao & Zhibao Li, 2018. "The impact of manufacturer’s encroachment and nonlinear production cost on retailer’s information sharing decisions," Annals of Operations Research, Springer, vol. 264(1), pages 499-539, May.
    11. Fu, Ke & Wang, Ce & Xu, Jiayan, 2022. "The impact of trade credit on information sharing in a supply chain," Omega, Elsevier, vol. 110(C).
    12. Yue, Xiaohang & Liu, John, 2006. "Demand forecast sharing in a dual-channel supply chain," European Journal of Operational Research, Elsevier, vol. 174(1), pages 646-667, October.
    13. Wei-Shiun Chang & Daniel A. Sanchez-Loor, 2020. "Downstream Information Leaking and Information Sharing Between Partially Informed Retailers," Journal of Industry, Competition and Trade, Springer, vol. 20(4), pages 733-760, December.
    14. Leon Yang Chu & Noam Shamir & Hyoduk Shin, 2017. "Strategic Communication for Capacity Alignment with Pricing in a Supply Chain," Management Science, INFORMS, vol. 63(12), pages 4366-4377, December.
    15. Bian, Wenliang & Shang, Jennifer & Zhang, Juliang, 2016. "Two-way information sharing under supply chain competition," International Journal of Production Economics, Elsevier, vol. 178(C), pages 82-94.
    16. Zhang, Jian & Nault, Barrie R., 2023. "Information sharing in an MTO supply chain with upstream adjustments," European Journal of Operational Research, Elsevier, vol. 308(1), pages 97-112.
    17. Kostas Bimpikis & Davide Crapis & Alireza Tahbaz-Salehi, 2019. "Information Sale and Competition," Management Science, INFORMS, vol. 67(6), pages 2646-2664, June.
    18. Lode Li & Hongtao Zhang, 2008. "Confidentiality and Information Sharing in Supply Chain Coordination," Management Science, INFORMS, vol. 54(8), pages 1467-1481, August.
    19. Zhongyuan Hao & Li Jiang & Wenli Wang, 2018. "Impacts of sequential acquisition, market competition mode, and confidentiality on information flow," Naval Research Logistics (NRL), John Wiley & Sons, vol. 65(2), pages 135-159, March.
    20. Mukhopadhyay, Samar K. & Yue, Xiaohang & Zhu, Xiaowei, 2011. "A Stackelberg model of pricing of complementary goods under information asymmetry," International Journal of Production Economics, Elsevier, vol. 134(2), pages 424-433, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:57:y:2011:i:3:p:566-581. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.