Manufacturer rebate in green supply chain with information asymmetry

Abstract

In this article, we study the influences of manufacturer rebate on the outcomes of the channel members in a green supply chain, where the retailer has private information about market demand. We find that, (1) manufacturer rebate is good for the channel members, however, the manufacturer takes a lower share of the incremental profit than the retailer; (2) the value of manufacturer rebate for the channel members increases as the promotion frequency and the slippage effect increase. Then, we extend the models to the cases with information sharing and simultaneous game mode, respectively. The results show that, (1) information sharing benefits the manufacturer, but does not necessarily hurt the retailer; (2) a suitable manufacturer rebate strategy will promote the retailer to share the demand information; (3) the first-mover advantage of manufacturer benefits himself, but hurts the retailer and the channel.

Keywords:

• M
• anufacturer rebate
• game theory
• information asymmetry
• green supply chain

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 When consumers overestimate the value of a rebate or underestimate the cost of redemption at the time of purchasing, they may purchase the products because of a rebate but only redeem part of the rebate or fail to redeem it. This kind of consumer inconsistency is called the slippage effect (Gilpatric 2009; Silk 2010).

2 In some industries, the rebate value and retail price are usually decided more frequently than wholesale price therefore should be decided at a later stage, especially for perishable commodities and fast moving consumer goods. The assumption of simultaneous determination of the rebate value and the retail price can be considered as approximating a negotiation process between the channel members in setting the terms of a manufacturer rebate while the manufacturer is not particularly more powerful than the retailer. Furthermore, this assumption has been used in several previous studies (Aydin and Porteus 2008; Demirag, Chen, et al., 2011).

Additional information

Funding

This work was supported by the Chinese National Funding of Social Sciences [grant number 18BGL106].