Cooperative behavior and information sharing in the e-commerce age

Abstract

In this research, we consider a supplier-e-tailer supply chain where the e-tailer offers a full return policy (i.e., full refund) to its consumers and both the supplier and the e-tailer have their own information about the product demand of online selling. In this setting, we investigate what effective mechanism can be utilized to motivate the supplier and the e-tailer to share their information and also eliminate information distortion simultaneously, and how the e-tailer's return policy impacts the value of information sharing. Our results show that when the two-part tariff mechanism is implemented, both the supplier and the e-tailer would share their information conditionally. As a result, both the supplier and the e-tailer have their motivations to distort the shared information. However, the cooperative wholesale price with profit sharing is an effective mechanism to be utilized to motivate the supplier and the e-tailer to share their information truthfully and create a win-win solution. Furthermore, our results show that comparing to the two-part tariff mechanism, the cooperative wholesale price mechanism has a competitive advantage to help both the supplier and the e-tailer achieve higher profits. In addition, our results also indicate that both the supplier and the e-tailer have stronger motivation to implement an information sharing arrangement when a full return policy is offered to consumers.