imchen@ust.hk T his study investigates a retailer's incentive for sharing private demand information with a supplier who may encroach the retail channel by imposing a fixed entry cost. Although conventional wisdom suggests that a retailer should withhold her private demand observations to maintain an information advantage over the supplier, we obtain a different conclusion by demonstrating that the retailer may prefer to voluntarily share the demand information in anticipation of supplier encroachment. The intuition is that in face of the threat of supplier encroachment, sharing low demand information may prevent the supplier from establishing a direct selling channel, which will reduce downstream channel competition. This strategic effect of information sharing is new and only becomes dominant when there is an intermediate entry cost for encroachment and a high channel substitution rate. In contrast, when there are deviations from these conditions, the supplier's equilibrium encroachment decision is consistent and irrespective of the retailer's decision to share information, which makes withholding the demand information more beneficial to the retailer. The change of information sharing structure in the channel also leads to some unintended payoff implications, as the supplier's and channel's payoffs exhibit non-monotonic relations to the entry cost or channel substitution rate.Notes 1 Please see more details at "http://www.virtual-sales. com/direct-sales-vs-channel-sales/." Supporting InformationAdditional supporting information may be found online in the supporting information tab for this article:Appendix S1: Proofs.

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This study investigates a supplier’s voluntary disclosure strategy when it can encroach on a retailer’s operations by selling directly to final consumers. The establishment of a direct sales channel expands market potential, induces the supplier to adopt a more frequent disclosure strategy, and ultimately leads to a higher level of information transparency in the supply chain. Since more quality information is revealed in the presence of a dual channel, the retailer is able to free ride on the supplier’s disclosure to enhance consumers’ quality expectations. In most cases, such a free‐riding effect is positive and can even create a higher ex ante payoff for the retailer in face of the supplier’s encroachment. Conversely, more transparent product quality information does not necessarily benefit the supplier, who can then no longer hide negative quality information from consumers due to the potential change in the channel structure. Thus, we show that the supplier’s ex ante payoff may become lower with encroachment and that the supplier may commit not to encroach on the retail market, even when it has a free option to open a direct sales channel.

This study investigates the interactions between a manufacturer's information acquisition and quality disclosure strategies in a supply chain setting in which the manufacturer privately knows his product quality but is uncertain about consumer preferences. We argue that the manufacturer should treat his information acquisition and quality disclosure decisions as an integrated process because these decisions can significantly influence a retailer's rational inferences about product quality and can have conflicting effects on his own profitability. Although information acquisition helps a manufacturer subsequently craft better pricing and quality disclosure strategies, it also leaks certain product information to the retailer, thus helping the retailer better estimate product quality. Therefore, in equilibrium, a manufacturer may choose not to acquire any consumer information, even when such acquisition is costless. Moreover, we find that this adverse effect of acquisition is highly dependent on the cost of disclosure and consumers’ preference differentiation. Increased consumer preference differentiation may have a non‐monotonic relationship with the manufacturer's profit, and information acquisition can become detrimental to the manufacturer once the disclosure cost is sufficiently high.