Quality information disclosure with retailer store brand introduction in a supply chain

Abstract

This study examines firms’ product quality information disclosure incentives in a supply chain wherein an upstream manufacturer sells a national brand via a downstream retailer who also sells its own store brand. Two disclosure formats, manufacturer disclosure (M-C) and retailer disclosure (R-C), are considered depending on which party bears responsibility for quality disclosure. We demonstrate that a retailer’s store brand induces the manufacturer (retailer) to reveal quality information more conservatively (aggressively). Further, when the store brand is introduced, the retailer may disclose more quality information in the R-C format than in the M-C format, given that both the brand preference differential and the disclosure costs are high. Moreover, we find that the store brand does not necessarily harm (benefit) the manufacturer (retailer) under the premise of asymmetric quality information. From the ex-ante perspective, the store brand may benefit both firms under the M-C format but prove disadvantageous under the R-C format. This suggests that, in addition to the ‘win–lose’ outcome for the retailer and the manufacturer, ‘win–win’ and ‘lose–lose’ outcomes may also arise in equilibrium with the store brand.