Bilateral information sharing in a supply chain with manufacturer competition

Abstract

Information sharing has been regarded as a way to coordinate or to optimize the whole supply chain. Prior literature focuses on unilateral information sharing in a supply chain with single or substitutable products. This paper explores bilateral demand information sharing in a supply chain, in which two competing manufacturers provide substitutable products to a common retailer. All supply chain members have partial forecast information about the market demand. We establish three pricing decision models and derive the corresponding results by backward induction to study the effects of bilateral information sharing on pricing and expected profits of supply chain members under three information sharing strategies. The results show that (i) information sharing decreases the positive effect of manufacturer’s demand forecast on the optimal price, but increases the positive effect of retailer’s demand forecast; (ii) information sharing benefits two manufacturers and hurts the retailer, whereas benefits the whole supply chain under certain conditions; (iii) the retailer prefers to share information with one of manufacturers rather than both of manufacturers. Finally, we also provide some managerial insights with the help of computational studies.