Research on the Interaction of Information Disclosure and Channel Selection Strategies

Abstract

In this paper, we use a game-theoretic approach to investigate quality disclosure strategies for a dual channel manufacturer facing a potential market entry. We develop a dual-channel supply chain model consisting of an incumbent manufacturer(F1), an incursive manufacturer(F2) and a retailer. In the first stage, F1 decides whether to disclose its quality information and F2 decides whether to sell products through a retailer. In the next stage, manufacturers decide the selling prices, or they decide the wholesale prices and the retailer decides the selling prices. We derive the optimal disclosure strategies of the incumbent and channel selection of the entrant. We show that in equilibrium F1 will disclose the quality within the disclosure threshold which depends on product similarity and disclosure cost. We compare thresholds in three cases and find that F1 has the strongest will to disclose quality when F2 invades from the online channel. Moreover, we derive the results on how the optimal selling prices, wholesale prices, manufacturers' profits change when the product similarity changes, and generate managerial insights of the research findings.