Strategic demand information sharing under partial cross ownership

Abstract

We consider a two-echelon supply chain with partial cross ownership (PCO) comprising a supplier and a retailer. The retailer is endowed with superior information about uncertain market potential. The supplier must produce the product before the market potential is realized. We explore the retailer’s strategy to share his private demand information with the supplier via cheap talk. We demonstrate that when the proportion of partial cross holding shares is moderate, the retailer can disclose private demand information truthfully. Without PCO, this informative equilibrium cannot be achieved regardless of the acquired signal. With PCO, the retailer wants to obtain a sufficient production quantity if the realized demand is high and fears the cost of unsold products if the realized demand is low. These two countervailing incentives can cause the retailer to share his information truthfully. We find that this truthful information sharing benefits both the retailer and the supplier. In addition, we discuss the case of endogenous wholesale price and indicate the conditions in which truthful information sharing can be achieved. Moreover, we find that when the market potential follows a general continuous distribution, the perfect informative equilibrium does not exist.

KEYWORDS:

• Supply chain management
• partial cross ownership
• strategic information sharing
• signal precision
• perfect informative equilibrium

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

Data sharing is not applicable to this article as no new data were created or analysed in this study.

Notes

1 See http://mini.eastday.com/mobile/171212232259283.html#.

2 See http://q.stock.sohu.com/news/cn/019/600019/3604974.shtml.

3 See http://tech.sina.com.cn/it/2006-07-25/09161053487.shtml.

4 See http://www.sohu.com/a/350170122_120073397.

Additional information

Funding

This work was supported by the National Natural Science Foundation of China [grant number 71901117]; Ministry of Education in China of Humanities and Social Science Project [grant number 19YJC630242].

Notes on contributors

Jingru Wang

Jingru Wang is currently a Lecturer at the School of Information and Mathematics, Yangtze University. She obtained her doctoral degree in Operations Research from Hunan University of Chain in 2020. Her research interests lies in Supply Chain Management, Information Sharing and Operational planning.

Kuanyun Zhu

Kuanyun Zhu is a Lecturer at the School of Information and Mathematics, Yangtze University. He received his Ph.D. in Math from Wuhan University. His research focuses on Fuzzy Logic, Supply Chain Management and Pricing.

Jiawu Peng

Jiawu Peng is currently a Ph.D. student at the School of Business Administration, Hunan University. He obtained his Master and B.Eng. degree in Math from the Central South University. His research focuses on Operational Planning, Logistics and Supply chain management.

Wenyan Zhuo

Wenyan Zhuo is a lecturer at the School of Marketing and Logistics Management, Nanjing University of Finance and Economics, China. He received his PhD from Hunan University. His research focuses on Supply Chain Financing and Information Sharing.