Information and profit sharing between a buyer and a supplier: Theory and practice

Kai Li, Xin-Yang Liu, David Jacobson
  • Managerial and Decision Economics, July 2017, Wiley
  • DOI: 10.1002/mde.2870

A supermarket shares consumer demand information with a sole supplier. Can both firms be better off?

What is it about?

This paper is about aspects of an optimal relationship between two firms, a supplier and a retailer, in a two‐party supply chain. The focus is on sharing private information when demand uncertainty exists so as to better coordinate the supply chain. It draws inspiration from a real case in Ireland of a new fish‐processing company, Oceanpath, and a supermarket chain, Superquinn, in which information was shared. The argument is that sharing the retailer's information increases supply chain profit, as well as benefiting consumers. Profit sharing will be needed to guarantee that both the retailer and the supplier gain when information is shared.

Why is it important?

The literature generally concludes that the larger firm, with the information, loses out as a result of sharing information with the supplier. This paper shows that this is not necessarily so, and provides evidence that the relationship that actually existed between the retailer and the supplier could indeed have been in the interests of both.

Perspectives

Professor David S Jacobson
Dublin City University

What remains is the question as to why, given the results reported in this paper, there are not more examples of deeply cooperative relationships between supermarkets and their suppliers.

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http://dx.doi.org/10.1002/mde.2870

The following have contributed to this page: Professor David S Jacobson