The choices of channel structures and information strategies in a supply chain

Abstract

This study considers the choices of channel structures and information strategies in a supply chain with demand uncertainty. The results show the following: (1)The decentralized channel structure dominates the centralized channel structure when the information strategy is given. (2)Information sharing by the downstream rival is always beneficial to the vertically integrated producer but is not necessarily detrimental to itself. In particular, information sharing increases the downstream rival’s profit in the centralized channel structure when the demand signal is relatively accurate. (3)The vertically integrated producer always benefits from the increase in forecast accuracy and the downstream rival may be worse off in some situations, which provides a theoretical ground for the “accuracy trap.” In addition, the discussions of the wholesale price commitment and the uniform pricing contracts show that the wholesale price contracts can influence the information sharing conditions of the downstream rival and the effects of strategic decentralization, eventually influencing the equilibrium strategies of channel members.