Fit revelation strategy in a supply chain with two types of consumers

Abstract

This paper develops a game theoretical model for a supply chain consisting of one manufacturer and one retailer who chooses one of two strategies: implementing fit revelation or not implementing fit revelation. Firstly, the fit revelation strategy of the retailer in the decentralized supply chain is analyzed. When the market scale is medium, the fit revelation strategy is implementing fit revelation and only good-fit consumer will buy the product; otherwise, it is not implementing fit revelation. The results are counterintuitive because people may believe that it would be better to let consumers know more information about the product when the market scale is low. Implementing fit revelation is not always beneficial for consumers. When the market scale is sufficiently low, good-fit and bad-fit consumers both prefer not implementing fit revelation. Secondly, the paper also considers the case in which the manufacturer decides whether to implement fit revelation. Sometimes, the retailer and the manufacturer prefer themselves to facilitate fit revelation. Thirdly, the effect of decentralization is investigated. Numerical examples show that the interval in which implementing fit revelation is optimal is larger under the centralized setting than that under the decentralized setting. The decentralization decreases the probability to implement fit revelation.