Contracting and information sharing for duopoly supply chains with price competition

In today's rapidly changing business environment, characterized by population growth and the proliferation of diverse industries, the ability to make well-informed decisions through efficient information sharing is crucial. This holds particular significance for companies aiming to maintain a competitive edge. Previous research often focus narrowly on characterizing and comparing different contracts, overlooking essential factors such as contract features, adherence, and information efficiency in contract execution or market competition. In the context of the supply chain, these variables significantly impact decision-making. To bridge this gap, this study examines the influence of information sharing on the actions and profitability of supply chain competitors, considering both contract menus and linear pricing contracts. Two rival supply chains, each with one manufacturer and one retailer, are modeled. The retailers are closely scrutinized to comprehend their decision-making process regarding information sharing and associated costs. Using a non-cooperative Stackelberg-manufacturer game and a competitive retailer game, this study investigates the divergent effects of various contract types on the profitability and performance of supply chain participants. The findings highlight the critical roles of information sharing and contract type selection in profit within the supply chain. Retailers achieve higher profits with linear price contracts without sharing information, while manufacturers benefit more from contract menus with information sharing. This underscores the importance of strategically selecting contract types that align with specific circumstances, considering factors like information sharing and competition. Furthermore, information sharing in one supply chain can influence decisions in another. The study reveals that manufacturers are more inclined to use contract menus and share information, whereas retailers are reluctant. The analysis also presents a scenario akin to the prisoner's dilemma, where neither supply chain engages in information sharing with linear price contracts, despite the potential benefits through such sharing.