Information Acquisition and Its Incentives in an E-Commerce Supply Chain under the Offline Showroom Model

Mengli Li,Xumei Zhang

doi:10.3390/jtaer16050100

Abstract

Recently, the showroom model has developed fast for allowing consumers to evaluate a product offline and then buy it online. This paper aims at exploring the optimal information acquisition strategy and its incentive contracts in an e-commerce supply chain with two competing e-tailers and an offline showroom. Based on signaling game theory, we build a mathematical model by considering the impact of experience service and competition intensity on consumers’ demand. We find that, on the one hand, information acquisition promotes supply chain members to obtain demand information directly or indirectly, which leads to forecast revenue. On the other hand, information acquisition promotes supply chain members to distort optimal decisions, which results in signal cost. The optimal information acquisition strategy depends on the joint impact of forecast revenue, signal cost and demand forecast cost. Notably, in some conditions, the offline showroom will not acquire demand information even when its cost is equal to zero. We also design two different information acquisition incentive contracts to obtain Pareto improvement for all supply chain members.

Highlights

∆E[πi ] denote value brought by information acquisition to the showroom and e-tailer i
Where Fs and Fi denote forecast revenue brought by information acquisition to the showroom and e-tailer i, Ss and Si denote signal cost brought by information asymmetry to
This paper studies the impact of information acquisition on the optimal decisions of supply chain members, and finds that information acquisition generates both positive forecast revenue and negative signal cost

Summary

Introduction

The showroom model has developed fast for allowing consumers to evaluate a product offline and buy it online. This paper aims at exploring the optimal information acquisition strategy and its incentive contracts in an e-commerce supply chain with two competing etailers and an offline showroom. Information acquisition promotes supply chain members to distort optimal decisions, which results in signal cost. This results in the fact that some product categories, which need to be touched and felt, such as household products, apparel and accessories, are confronted with large amounts of returns [1,2] Under this background, the offline showroom model (showroom for short) emerges to solve the high return rate issue of the online channel.

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