Impacts of power structure on information sharing in a distribution channel considering the signal game

This paper studies the effects of power structure on information sharing in an asymmetric information market. We uncover an intriguing phenomenon: retailers may adopt different information sharing strategies, which may be related to the power structure. Therefore, investigating how the power structure affects retailers’ information sharing strategies is pertinent. We develop a game-theoretic model involving a supply chain with a manufacturer and a retailer, where the retailer has demand information advantages. Our findings yield several significant insights: Firstly, we demonstrate that being the Stackelberg leader is not always profitable. Being the Stackelberg leader is advantageous for firms in a symmetrical demand information market. However, in the asymmetric demand information market, if the demand information is very valuable, it is detrimental to firms to be Stackelberg leaders. Secondly, we derive the conditions under which the retailer shares demand information. Specifically, if the retailer is the Stackelberg leader, she will choose to share information; otherwise, she will refuse to share information. Thirdly, contrary to conventional wisdom, the retailer’s information sharing does not consistently benefit the manufacturer. If the retailer is the Stackelberg leader, information sharing harms the manufacturer; otherwise, it benefits the manufacturer. Our study provides useful insights for managers to understand and make information sharing decisions under various power structures.