Confidentiality and Information Sharing in Supply Chain Coordination

Abstract

We consider information sharing in a decentralized supply chain where one manufacturer supplies to multiple retailers competing in price. Each retailer has some private information about the uncertain demand function which he may choose to disclose to the manufacturer. The manufacturer then sets a wholesale price based on the information received. The information exchange is said to be confidential if the manufacturer keeps the received information to herself, or nonconfidential if she discloses the information to some or all other retailers. Without confidentiality, information sharing is not possible because it benefits the manufacturer but hurts the retailers. With confidentiality, all parties have incentive to engage in information sharing if retail competition is intense. Under confidentiality, the retailers infer the shared information from the wholesale price and this gives rise to a signaling effect that makes the manufacturer's demand more price elastic, resulting in a lower equilibrium wholesale price and a higher supply chain profit. When all retailers share their information confidentially, they will truthfully report the information and the supply chain profit will achieve its maximum in equilibrium.information sharing, confidentiality, signaling, supply chain coordination, truth telling

Information security in networked supply chains: impact of network vulnerability and supply chain integration on incentives to invest

“…This stream has also investigated the impact of information sharing on the price structure within a supply chain [22,38]. The issue of confidentiality in sharing of sensitive information within a supply chain was analyzed by Li and Zhang [23]. Mishra et al [25] showed that both the manufacturer and the retailer have incentives to share distorted information.…”

Analysis of market competition and information asymmetry on selling strategies

“…Similar information paradigms have been studied in the supply chain management literature (see, e.g., Li and Zhang 2008;Anand and Goyal 2009;Shin and Tunca 2010;Taylor and Xiao 2010;Ha et al 2011;Choi et al 2013;Li et al 2014). For example, Choi et al (2013) study strategic information sharing in a two-level supply chain and show that return policy can achieve win-win between supplier and retailer.…”

The Value of China Steam Coal Supply Chain Information Sharing and Impact of Lead-Time and Seasonal Factor

“…Fierce competition and advent of information technology promote the cooperation of companies in the supply chain (Ha & Tong, 2008), information sharing is viewed as one of the key elements for successful supply chain management and coordination. Information sharing can reduce the risk brought by asymmetric incomplete information ,cut down lead time ,mitigate bullwhip effect and reduce total cost and increase total supply chain profit Li & Zhang, 2008;. The global performance of a supply chain can be highly improved by information sharing between its members at different levels (MontoyaTorres & Ortiz-Vargas, 2014).…”

“…Information sharing can reduce the risk brought by asymmetric incomplete information, cut down lead time, mitigate bullwhip effect Li & Zhang, 2008;. Many research concerns the reason of bullwhip effect.…”

“…Since 2000 there were many literatures concern vertical information sharing. Li & Zhang (2008) studied vertical information sharing between one manufacturer and several retailers which compete in price. They found confidentiality has value to the retailers and make the supply chain more efficient as a whole.…”