Sharing Demand Information in an E-Commerce Supply Chain: Reselling, Agency Selling or Hybrid

Abstract

In practice, suppliers sell their products through online intermediaries (e.g., JD.com and Amazon) who sell them to customers (reselling) or directly access customers via intermediaries by paying a proportional fee (agency selling). Unlike giant intermediaries across the world, these suppliers have smaller scales and are more risk averse. Motivated by practical examples in which these intermediaries share superior demand information with their sellers, this paper studies their incentives for vertical demand information sharing. We develop a game-theoretic model to consider a hybrid e-commerce supply chain with a risk-neutral intermediary and two risk-averse suppliers, where one supplier (agency supplier) adopts the agency selling format while the other supplier (reselling supplier) employs the reselling format. As a benchmark, we show that it is beneficial for the intermediary to share all (no) information with both risk-neutral suppliers if the proportional fee is relatively high (low). However, our result suggests that considering suppliers’ risk aversions would critically change the intermediary’s information-sharing strategy. In fact, we find that the risk aversion of the agency supplier makes the intermediary more willing to share information, while the risk aversion of the reselling supplier prevents the intermediary from disclosing information. Moreover, the intermediary should disclose part rather than all of its information to both suppliers with identical risk attitudes if the proportional fee is high (intermediate) in a weakly (highly) competitive market environment. Finally, we observe that the aggregate effect of both suppliers’ risk aversions induces the intermediary to be less (more) willing to share information when the reselling supplier’s sensitivity to risk is sufficiently high (low) relative to the agency supplier’s sensitivity to risk.