Vertical value-added cost information sharing in a supply chain

Mengqi Liu, Yueli Zhao, Rui Huang () and Sandun Perera
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Mengqi Liu: Hunan University
Yueli Zhao: Hunan University
Rui Huang: Hunan University
Sandun Perera: The University of Nevada

Annals of Operations Research, 2023, vol. 329, issue 1, No 27, 814 pages

Abstract: Abstract We study a two-echelon supply chain with two homogeneous manufacturers and one common retailer who has full knowledge about his own value-added service cost structure that is unknown to the manufacturers. The retailer may choose to disclose his cost information to the manufacturers. Using a three-stage game-theoretic model, we derive optimal pricing strategies for each participant, and optimal information sharing strategies, and the optimal level of the value-added services for the retailer. Our study also reveals when the manufacturers should accept the disclosed information by the retailer. It is shown that information sharing does not always create a win–win situation among the partners in the supply chain. When the value-added service cost efficiency is low, the retailer is willing to share complete information with the manufacturers; however, information sharing harms the manufacturers’ profits if they accept the shared information. In contrast, when the value-added service cost efficiency is high, the common retailer has no incentive to share information with the manufacturers and the unique equilibrium is no information sharing. Finally, we utilize a revenue-sharing contract to achieve supply chain coordination and induce information sharing under asymmetric information.

Keywords: Value-added services; Information asymmetry; Game theory; Two-echelon supply chain; Equilibrium strategy (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10479-021-04021-3

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