Inducing Downstream Information Sharing via Manufacturer Information Acquisition and Retailer Subsidy

Posted: 9 Jan 2018 Last revised: 14 May 2019

See all articles by Guo Li

Guo Li

University of Texas at Dallas; Beijing Institute of Technology

Suresh Sethi

University of Texas at Dallas - Naveen Jindal School of Management

Hong Zheng

Beijing Institute of Technology - School of Management & Economics

Xu (Gavin) Guan

School of Management, Huazhong University of Science and Technology

Multiple version iconThere are 2 versions of this paper

Date Written: January 1, 2018

Abstract

We investigate a manufacturer’s information acquisition and subsidization strategies in a supply chain featuring two competing retailers who sell substitutable products and have private demand information. The manufacturer can decide whether to acquire demand information at a cost and further decide whether to offer subsidies simultaneously to retailers to induce their sharing of private demand information. We demonstrate that subsidizing retailers is always in the manufacturer’s interest, but direct information acquisition is profitable only if its cost is low. Information acquisition helps the manufacturer gain superior demand information and leverages the retailer’s information advantage, thereby reducing the expenditure of subsidization. Compared with the simultaneous subsidy provision scheme, we further investigate the sequential and partial subsidy schemes and find that the simultaneous and sequential subsidy schemes result in an identical equilibrium outcome that dominates the equilibrium outcome in the partial subsidy scheme when three subsidy provision schemes are all feasible. Although the outcomes are the same, we show that the simultaneous subsidy scheme can be applied in a broader range than the sequential subsidy scheme can. Otherwise, if complete information sharing cannot be achieved, the partial subsidy scheme may be the optimal choice for the manufacturer.

Keywords: supply chain; information sharing; information acquisition; Cournot competition; subsidy

Suggested Citation

Li, Guo and Sethi, Suresh and Zheng, Hong and Guan, Xu, Inducing Downstream Information Sharing via Manufacturer Information Acquisition and Retailer Subsidy (January 1, 2018). Available at SSRN: https://ssrn.com/abstract=3096933

Guo Li (Contact Author)

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

Beijing Institute of Technology ( email )

5 South Zhongguancun street
Center for Energy and Environmental Policy Researc
Beijing, Haidian District 100081
China

Suresh Sethi

University of Texas at Dallas - Naveen Jindal School of Management ( email )

800 W. Campbell Road, SM30
Richardson, TX 75080-3021
United States

Hong Zheng

Beijing Institute of Technology - School of Management & Economics ( email )

Beijing, 100081
China

Xu Guan

School of Management, Huazhong University of Science and Technology ( email )

Huazhong University of Science and Technology
School of Management
Wuhan
China

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