Information technology-driven operational decisions in a supply chain with random demand disruption and reference effect

Abstract

Frequent occurrence of emergencies results in the persistence of unexpected demand disruption, which adds complexity to the supply chain and leads to inaccurate decisions easily. Precise information can generally help decision-makers to make accurate decisions, and sharing information between supply chain nodes is powerful in improving the performance of the supply chain. This paper examines how the random demand disruption and the consumers’ reference effect impact operational decisions, including pricing, information collection and sharing, in a dual-channel supply chain composed of one supplier and one platform. Three progressive game-theoretical models are proposed. We find that inaccurate disruption information brings substantial losses to the supply chain, and the reference effect will aggravate the loss for the platform but mitigate the loss for the supplier. When the degree of information distortion is high, the platform invests in new information technologies to collect precise information will benefit him, but will hurt the supplier. At this moment, if the supplier is willing to accept an information sharing contract with the platform, the platform will always choose a revenue sharing scheme, while the supplier wants the platform to choose a fixed fee scheme, especially when the reference effect is weak. Oppositely, when the degree of information distortion is small, the supplier should not accept the information sharing contract.