The Value of Information Design in Supply Chain Management

Ozan Candogan () and Huseyin Gurkan ()
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Ozan Candogan: Booth School of Business, University of Chicago, Chicago, Illinois 60637
Huseyin Gurkan: European School of Management and Technology Berlin, 10178 Berlin, Germany

Management Science, 2025, vol. 71, issue 8, 6545-6558

Abstract: This paper studies an information design problem of a retailer in a two-tier supply chain that procures a single type of product from a supplier. The supplier needs to decide on a production quantity by balancing the shortage cost and the excess inventory holding cost with respect to the retailer’s demand. The retailer’s demand is random, but the retailer receives an informative signal about the demand before the supplier sets the production quantity and places orders after learning the demand realization. The retailer wants to reduce the shortage cost, and to this end, the retailer can disclose information about the retailer’s signal to persuade the supplier to increase production levels. For this setup, we characterize the optimal information disclosure policy of the retailer and shed light on settings in which the retailer strictly benefits from carefully designed information disclosure policies relative to a full- or a no-disclosure policy.

Keywords: information design; supply chain management; newsvendor model; forecast sharing (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:71:y:2025:i:8:p:6545-6558

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