Author

Huajiang LUO

Date of Award

2018

Degree Type

Thesis

Degree Name

Doctor of Philosophy (PhD)

Department

Computing and Decision Sciences

First Advisor

Prof. SHANG Weixin

Second Advisor

Prof. LIU Liming

Abstract

This thesis presents two essays that explore firms’ incentive to share information in a multi-period decentralized supply chain and between competing firms. In the first essay, we consider a two-period supply chain in which one manufacturer supplies to a retailer. The retailer possesses some private demand information about the uncertain demand and decides whether to share the information with manufacturer. If an information sharing agreement is achieved, the retailer will share the observed demand information truthfully to the manufacturer. Then the selling season with two periods starts. In each period, the manufacturer decides on a wholesale price, which the retailer considers when deciding on the retail price. The manufacturer can observe the retailer's period-1 decision and the realized period-1 demand, and use this information when making the period-2 wholesale price decision. Thus, without information sharing, the two firms play a two-period signaling game. We find that voluntary information sharing is not possible because it benefits the manufacturer but hurts the retailer. However, different from one-period model, in which no information sharing can be achieved even with side payment, the manufacturer can make a side payment to the retailer to induce information sharing when the demand range is small. Both firms benefit from more accurate information regardless whether the retailer shares information. We also extend the two-period model to three-period model and infinite-period model, we find that the above results are robust. The second essay studies the incentives for information sharing between two competing firms with different production timing strategies. Each firm is planning to produce a new (upgraded) product. One firm adopts routine timing, whereby her production time is fixed according to her tradition of similar or previous models of the product. The other firm uses strategic timing, whereby his production time can be strategically chosen: be it before, simultaneously with, and after the routine firm. The two firms simultaneously choose whether or not to disclose their private demand information, make their quantity decisions based on any demand information available, and then compete in the market. We find that when the demand uncertainty is not high, both firms sharing information is the unique equilibrium outcome. Exactly one firm (the routine firm) sharing information can arise in equilibrium when the demand uncertainty is intermediate. These results are in stark contrast to extant literature which has shown that, for Cournot competitors with substitutable goods, no firm is willing to share demand information. Production timing is thus identified as a key driving force for horizontal information sharing, which might have been overlooked before. Surprisingly, when the competition becomes more intense, firms are more willing to share information. It is the information asymmetry that fundamentally change the strategic firm’s timing. We highlight the impact of signaling demand information for an early-production firm on the timing strategies, under different information sharing arrangements.

Language

English

Recommended Citation

Luo, H. (2018). Information leakage and sharing in decentralized systems (Doctor's thesis, Lingnan University, Hong Kong). Retrieved from https://commons.ln.edu.hk/otd/35/

Available for download on Sunday, November 01, 2020

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