Demand Information Sharing in a Green Supply Chain Under Upstream Competition

Abstract

Building a green and sustainable supply chain has been an initiative of leading companies under consumers' prevailing ecological awareness and the government's low-carbon subsidy programs. Motivated by the trend that firms are self-incentivized to choose from multiple versions of demand information-sharing toolkits provided by retail platforms, we develop a game-theoretic model with two competing manufacturers selling substitutable products through a common retailer, who has a private signal about market demand and decides whether, how much, and to whom to share the demand signal. We examine the incentives of firms to form an information-sharing partnership without or with a side payment contract specifying an information fee and accuracy. Our analysis shows that green production technical cost is an important mediator in driving the formation of the information-sharing partnership. Without the side payment contract, as the cost enlarges, the retailer's decision varies from sharing with both, to one, and finally to neither manufacturer, whereas the manufacturers are always better off from information sharing. With the side payment contract, the retailer's asymmetric sharing arrangement only occurs when the cost asymmetry is relatively large. Moreover, we characterize conditions where partial information sharing arises in equilibrium, which requires a moderate cost asymmetry. We also find that information sharing is more likely to happen when the government's low-carbon subsidy or consumers' green preference increases, whereas competition intensity has the opposite effect on the incentives of the retailer and the manufacturers.