Strategic selling agreement and information management under leakage in an e-commerce supply chain

Abstract

Nowadays, numerous manufacturers sell products through both an online e-tailer and an offline retailer. The e-tailer can use its rich sales data to predict the demand information and thus has the information advantage. This study develops a game-theoretic model to study the e-tailer’s selling agreement selection and information sharing policy in this multi-channel supply chain. The reselling agreement is adopted by offline retailer, while the reselling or the agency selling agreement can be prepared by the online e-tailer. Our analysis shows that the e-tailer’s information sharing strategy are quite different under these two agreements. That is, the e-tailer has an incentive to share information with the manufacturer voluntarily in the agency selling agreement whereas sharing information hurts the e-tailer in the reselling agreement. Interestingly, under an agency selling agreement, information sharing can make the manufacturer, the offline retailer, and the e-tailer becomes better than the non-information sharing scenario (i.e., Pareto-improvement). However, the reselling e-tailer only shares information with the manufacturer by virtue of information sharing contracting and the all-win outcomes are achieved if the demand uncertainty is high and the competition between the e-tailer and retailer is moderate. Furthermore, the interaction between the large commission rate and the less demand uncertainty drive the e-tailer to adopt the agency selling agreement; otherwise, the reselling agreement is the best choice for the e-tailer. Finally, we demonstrate that, when the e-tailer shares information with the manufacturer, the competing offline retailer always becomes better off due to the information leakage effect.