To Share or Not to Share: Demand Forecast Sharing in a Distribution Channel

Abstract

T his paper studies information sharing in a distribution channel where the manufacturer possesses better demand-forecast information than the downstream retailer. We examine three information-sharing formats: no information sharing (i.e., the manufacturer ex ante commits to not sharing its forecast), voluntary information sharing (i.e., the manufacturer makes the sharing decision ex post after receiving the forecast), and mandatory information sharing (i.e., the manufacturer is mandated to share its forecast). We characterize the equilibrium outcomes under the three sharing formats and investigate the firms' preferences regarding these formats. It is shown that when the retailer is risk-neutral, both firms are indifferent between voluntary and mandatory sharing. Among the three formats, ex ante, the retailer prefers the no-sharing format whereas the manufacturer prefers the mandatory-sharing format. In addition, we find that a more accurate forecast benefits both firms under voluntaryand mandatory-sharing formats, but may hurt both firms under the no-sharing format. Finally, we show that risk aversion plays a critical role in the firms' sharing decisions and the impact of forecast accuracy. Specifically, when the retailer is risk-averse, the manufacturer may prefer the no-sharing format over the voluntary-sharing format, and improving forecast accuracy may hurt both firms even under voluntary sharing.

Manufacturer product quality information disclosure with channel encroachment in the E‐commerce age

“…Our study is also related to the literature on information sharing in supply chain settings, such as one‐manufacturer‐one‐retailer (e.g.,Guo, ; Guo & Iyer, ; Mittendorf et al, ; Jiang et al, ; Huang & Wang, ; Teunter et al, ; Zhang et al, ), one‐manufacturer‐multiple‐retailers (e.g.,Li, ; Li & Zhang, ; Wu et al, ; Wang et al, ) and competing supply chains (Guo et al, ; Shamir & Shin, ; Ha et al, ; Guan et al, ; Wei et al, ). Some studies also investigate information sharing in a dual‐channel supply chain setting (Yue & Liu, ; Zhang et al, ).…”

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Buy now and price later: Supply contracts with time-consistent mean–variance financial hedging

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