Impact of Reseller's Forecasting Accuracy on Channel Member Performance

32 Pages Posted: 10 Mar 2012

See all articles by Ying-Ju Chen

Ying-Ju Chen

Hong Kong University of Science & Technology (HKUST) - Department of Information Systems, Business Statistics and Operations Management

Wenqiang Xiao

New York University (NYU) - Department of Information, Operations, and Management Sciences

Date Written: January 8, 2012

Abstract

This paper studies a three-layer supply chain where a manufacturer sells product through a reseller who then relies on its own salesperson to sell to the end market. The reseller has superior capability in demand forecasting relative to the manufacturer. We explore the main tradeoffs between the risk-reduction effect and the information-asymmetry-aggravation effect of the improved forecasting accuracy. We show that under the optimal wholesale price contract, both the manufacturer and the reseller are always better off as the reseller’s forecasting accuracy improves. Nevertheless, under the menu of two-part tariffs, the manufacturer prefers the reseller to be either uninformed or perfectly informed about the market condition. We further find that the improved forecasting accuracy is beneficial for the reseller if its current forecasting system is either very poor or very good.

Suggested Citation

Chen, Ying-Ju and Xiao, Wenqiang, Impact of Reseller's Forecasting Accuracy on Channel Member Performance (January 8, 2012). Available at SSRN: https://ssrn.com/abstract=2019059 or http://dx.doi.org/10.2139/ssrn.2019059

Ying-Ju Chen

Hong Kong University of Science & Technology (HKUST) - Department of Information Systems, Business Statistics and Operations Management ( email )

Clear Water Bay
Kowloon
Hong Kong

Wenqiang Xiao (Contact Author)

New York University (NYU) - Department of Information, Operations, and Management Sciences ( email )

44 West Fourth Street
New York, NY 10012
United States

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