Demand information sharing in competing supply chains with manufacturer-provided service

Abstract

This paper investigates the issue of sharing demand information in two competing supply chains, each consisting of one manufacturer who provides consumers with free after-sales service and one retailer who has private information about uncertain demand. The demand is linearly affected by retail prices and service levels of both supply chains, which captures both price and service competition. By modeling a multistage game framework, we examine the impacts of information sharing on price and service decisions and explore the value of information sharing to each supply chain. Our results show that information sharing enables the manufacturers to adjust their wholesales prices and service levels responsively to demand, which can benefit their supply chains if they are efficient in service investment. Moreover, information sharing in one supply chain can also trigger decision adjustments in the other supply chain, which may be beneficial to the first supply chain. Through analyzing the information-sharing equilibrium, we find that information sharing is more likely to occur when manufacturers are more efficient in service investment, consumers care more about service, or competition is more intense. In particular, when manufacturers' service investment efficiency or consumers' service attention is sufficiently high, retailers will voluntarily share demand information regardless of competition intensity. In addition, we illustrate that there exists a prisoner's dilemma where neither supply chain has information sharing even though they will be better off if both have.