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- Title
Sharing Demand Information in Competing Supply Chains with Production Diseconomies.
- Authors
Ha, Albert Y.; Shilu Tong; Hongtao Zhang
- Abstract
This paper studies the incentive for vertical information sharing in competing supply chains with production technologies that exhibit diseconomies of scale. We consider a model of two supply chains each consisting of one manufacturer selling to one retailer, with the retailers engaging in Cournot or Bertrand competition. For Cournot retail competition, we show that information sharing benefits a supply chain when (1) the production diseconomy is large and (2) either competition is less intense or at least one retailer's information is less accurate. A supply chain may become worse off when making its information more accurate or production diseconomy smaller, if such an improvement induces the firms in the rival supply chain to cease sharing information. For Bertrand retail competition, we show that information sharing benefits a supply chain when (1) the production diseconomy is large and (2) either competition is less intense or information is more accurate. Under Bertrand competition a manufacturer may be worse off by receiving information, which is never the case under Cournot competition. Information sharing in one supply chain triggers a competitive reaction from the other supply chain and this reaction is damaging to the first supply chain under Cournot competition but may be beneficial under Bertrand competition.
- Subjects
INFORMATION sharing; SUPPLY chains; DISECONOMIES of scale; INDUSTRIAL costs; ECONOMIC competition
- Publication
Mathematics of Operations Research, 2011, Vol 36, Issue 1, p566
- ISSN
0364-765X
- Publication type
Article
- DOI
10.1287/mnsc.1100.1295