Abstract
Many suppliers invest in product development for market expansion via product development efforts. However, not all suppliers have accumulated market information, which is a critical factor for efficient product development that helps suppliers know consumer preferences better. Being aware of this, some e-tailers (e.g., JD.com) provide market information and data insights for their suppliers, which improves the latter’s product development efficiency. Supported by the market information, the market potential of suppliers’ products can be enlarged and their pricing power may be strengthened, which affects e-tailers from both positive and negative aspects. Based on these observations, we investigate an e-tailer’s incentive to share market information to its suppliers by formulating the tradeoffs among market expansion, product development efficiency, and suppliers’ pricing decisions. We find that the e-tailer prefers sharing market information with its suppliers when the latter’s product development efficiency is high, or the product development efficiency is high but the efficiency improvement rate is high.
Highlights
Modern data collection and analysis technologies have brought an explosion in both the scope and volume of market data, which includes valuable market information for firms that produce goods and sell to the market
We find that the e-tailer always obtains a higher riskless profit in Scenario S because it can increase retail margin in Scenario S significantly, which covers its market demand size loss in Scenario S
We study whether the two suppliers can be better off because of market information sharing
Summary
Modern data collection and analysis technologies (e.g., big data analytics) have brought an explosion in both the scope and volume of market data, which includes valuable market information for firms that produce goods and sell to the market. We assume the retailer possesses market data/information and decides whether to keep it private or share it with its suppliers who are uninformed Such market data helps suppliers improve product development efficiency and eliminate demand uncertainty. We study an e-tailer’s incentives of sharing private market information with its supplier for helping them develop products, and two suppliers’ product development efforts enlarge market potential because of knowing consumers’ preferences well and their product satisfies more consumers. We consider the impact of the fact that market information improves suppliers’ production development efficiency and eliminates demand uncertainty via e-tailer’s data insights. Different from the forgoing works, we study supply chain parties’ incentives over demand information sharing and consider that a supply chain contains two suppliers and an e-tailer that engages in self-competition in the market and vertical competition in the supply chain
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