A MODEL OF INFORMATION AND I.T. ADOPTION IN FOOD SUPPLY CHAINS

Hamid Mohtadi (mohtadi@uwm.edu) and Jean D. Kinsey

No 14299, Working Papers from University of Minnesota, The Food Industry Center

Abstract: Evidence from the Food Supply chain suggests that food retailers often exhibit a reluctance to share information with their suppliers even when this benefits both parties. For example, inventory coordination and reduced costs may be realized by adopting appropriate supply chain management technologies such as cooperative planning, forecasting, and replenishment. This behavior is explained by viewing information as a strategic asset and modeling information exchange and the corresponding adoption of information technologies and analysis as a strategic game, i.e., an economic model where food retailers and their suppliers operate with uncertainty. The game is based on stylized facts from the food industry. Some key results from the game model are: (a) under certain conditions retailers may withhold valuable sales data from suppliers, even if the benefits from supply coordination are reduced; (b) there exists a revealed (inferred) equilibrium signal (i.e., suppliers know what orders will be) even when sales data are withheld from suppliers; and (c) unanticipated economic slow-downs cause overstocking which harm smaller firms more than larger ones, driving a wedge between them. This is an attempt to build economic (game-theoretic) models that incorporate the realities of the food supply/demand chain and then to see what behavior the models predict. Such models have been widely used to explain economic behavior and exchange at the agricultural end of the food supply chain and for international trade behavior. This is one of the first applications to the retail/wholesale/manufacture levels in the food delivery chain.

Keywords: Industrial Organization; Research and Development/Tech Change/Emerging Technologies (search for similar items in EconPapers)
Pages: 33
Date: 2002
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:umrfwp:14299

DOI: 10.22004/ag.econ.14299

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