The anti-collusion dilemma: Information sharing of the supply chain under buyback contracts

Abstract

While previous studies did not consider that buyback contracts in collusive research of supply chains and the buyback contract particularly strengthens collusion between retailers in the supply chain, we address a new research question: What is the effect of different retailer collusive patterns and information sharing mechanisms on the benefits of each member in supply chains with buyback contracts? To answer this research question, we develop four two-echelon supply chain models. The model consists of one supplier and two competing retailers. We consider the two dimensions of collusion mode and information sharing type and derive the optimal equilibrium solutions for each member. The theoretical analysis demonstrates the following results: (i) With explicit collusion, retailers are less willing to vertically share information with the supplier. (ii) Tacit collusion with low demand uncertainty motivates information sharing because the wholesale price can correctly convey the supplier’s information to retailers. (iii) Increasing the probability of high demand or reducing the buyback rate can benefit all members in the supply chain. (iv) Different from the wholesale price and revenue sharing contract, in the buyback contract, the whole supply chain sustains losses from vertical information sharing under the condition of collusion with high demand uncertainty. A numerical experiment shows interesting insights: Although explicit collusion generally brings profit improvement to retailers, they prefer to choose tacit collusion to effectively identify price signals when the demand uncertainty is lower. We check the robustness of results and find that the main results will not be changed in the extended model where the buyback price is lower than the wholesale price.