Impact of suppliers' risk aversions on information sharing in a hybrid E‐commerce supply chain

Abstract

AbstractIn practice, suppliers sell their products through online intermediaries who sell them to customers (reselling) or directly access customers via intermediaries by paying a proportional fee (agency selling). Unlike giant intermediaries, these suppliers have smaller scales and are more risk‐averse. Motivated by practical examples, this paper studies these intermediaries' incentives for vertical demand information sharing with their suppliers. We develop a game‐theoretic model to consider a hybrid e‐commerce supply chain with a risk‐neutral intermediary and two risk‐averse suppliers, where one supplier (agency supplier) adopts agency selling while the other supplier (reselling supplier) employs reselling. As a benchmark, we show that it is beneficial for the intermediary to share all (no) information with both risk‐neutral suppliers if the proportional fee is relatively high (low). However, we find that suppliers' risk aversion is a key factor leading to supply chain members' pricing decisions being influenced by the precision of the demand information. This influence impacts the double marginalization effect and further changes the intermediary's information‐sharing decisions. Specifically, the intermediary should disclose part rather than all of its information to both risk‐averse suppliers if the proportional fee is high (intermediate) in a weakly (highly) competitive market environment. Finally, when the reselling supplier's sensitivity to risk is sufficiently high (low) relative to the agency supplier's sensitivity to risk, we observe that the intermediary is less (more) willing to share information.