Retailer information strategies with a dual-purpose manufacturer

Abstract

While the information issues among for-profit firms are well known, the extent to which the presence in the market of dual-purpose manufacturers, defined as companies that focus on social welfare as well as their own interests, affects the information strategies of retailers is unclear. A better understanding of this relationship could shift the thinking on the disadvantages of the dual-purpose firm model. This study investigates how a retailer’s information strategy may differ for a for-profit manufacturer compared with a dual-purpose one. By analyzing an established mathematical model, the results indicate that by sharing information, a retailer can make a dual-purpose manufacturer more profitable than a for-profit manufacturer. This may occur when the retailer proactively shares market information with the dual-purpose manufacturer and when the dual-purpose manufacturer uses an information compensation fee lower than that for the for-profit manufacturer to incentivize the retailer to share such information. Further, both social welfare and the consumer surplus are higher in the former case than in the latter, implying that the presence of a dual-purpose manufacturer in the market can promote win/win results by benefiting both itself and society. This study’s findings enrich theories of information sharing and dual-purpose enterprises as well as suggest that information sharing is a useful management tool for practitioners to fully realize the development potential of dual-purpose enterprises.