Strategic information sharing under revenue-sharing contract : Explicit vs. tacit collusion in retailers

This work explores collusion and information sharing in a supply chain consisting of two downstream retailers and a mutual upstream manufacturer with the coordination by a revenue-sharing contract. We first analyze the equilibrium strategies of members in different types of collusion and the effect of collusion on information sharing. Considering the consumer surplus, downstream competition, collusion preference, and sharing with payment, we study the relationship among these factors and information sharing. We find that, under the revenue-sharing contract, explicit collusion will completely inhibit information sharing and tacit collusion can partially discourage the retailers from sharing information only if the wholesale price cannot accurately deliver the manufacturer's information to retailers, as opposed to that under a wholesale-price contract. Moreover, we show that the downstream market will attend to use the explicit collusion with the increase of the accurate signal and the weaker quantity competition between retailers will contribute to collusion. However it will not change the ways of collusion and information sharing. Finally, we demonstrate that information sharing can be achieved through side payment if the manufacturer gives retailers subsidies and tacit collusion is not always better than explicit collusion in terms of consumer surplus. Our research provides new interesting insights and makes difference with the existing studies which show that tacit collusion can result in lower consumer surplus.