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Vertical value-added cost information sharing in a supply chain

Author

Listed:
  • Mengqi Liu

    (Hunan University)

  • Yueli Zhao

    (Hunan University)

  • Rui Huang

    (Hunan University)

  • Sandun Perera

    (The University of Nevada)

Abstract

We study a two-echelon supply chain with two homogeneous manufacturers and one common retailer who has full knowledge about his own value-added service cost structure that is unknown to the manufacturers. The retailer may choose to disclose his cost information to the manufacturers. Using a three-stage game-theoretic model, we derive optimal pricing strategies for each participant, and optimal information sharing strategies, and the optimal level of the value-added services for the retailer. Our study also reveals when the manufacturers should accept the disclosed information by the retailer. It is shown that information sharing does not always create a win–win situation among the partners in the supply chain. When the value-added service cost efficiency is low, the retailer is willing to share complete information with the manufacturers; however, information sharing harms the manufacturers’ profits if they accept the shared information. In contrast, when the value-added service cost efficiency is high, the common retailer has no incentive to share information with the manufacturers and the unique equilibrium is no information sharing. Finally, we utilize a revenue-sharing contract to achieve supply chain coordination and induce information sharing under asymmetric information.

Suggested Citation

  • Mengqi Liu & Yueli Zhao & Rui Huang & Sandun Perera, 2023. "Vertical value-added cost information sharing in a supply chain," Annals of Operations Research, Springer, vol. 329(1), pages 781-814, October.
    • Handle: RePEc:spr:annopr:v:329:y:2023:i:1:d:10.1007_s10479-021-04021-3
    DOI: 10.1007/s10479-021-04021-3
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    References listed on IDEAS

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