EXPRESS: Driving Growth in Competing Supply Chains: Leveraging Upstream Demand Expansion and Downstream Information Sharing

Abstract

This paper explores the interaction between demand expansion and information sharing in competing supply chains, where each supply chain consists of one manufacturer and one retailer. Retailers compete on quantity and decide whether to share their private demand information with their manufacturers, who then engage in demand expansion across the market. We show that retailers become more inclined to share information as manufacturers' expansion efficiency improves (i.e., the cost coefficient of expansion decreases). In particular, a prisoner’s dilemma can occur when the expansion efficiency is intermediate: neither retailer shares their information but they would become better off if both do so. Moreover, a retailer is more likely to share information if her manufacturer exhibits higher expansion effectiveness (i.e., this expansion more effectively boosts demand growth). Interestingly, highly efficient expansion may harm manufacturers due to free-riding by competitors. Demand expansion benefits manufacturers and retailers when it is either very inefficient or significantly less effective than that of rivals, leading to a win-win outcome. Information sharing can further enlarge this win-win region, suggesting its role in promoting demand expansion. We check the robustness of our results with a few model extensions.