Sharing demand information in competing supply chains with greening efforts.

Abstract

This study considers a supply chain model wherein the retailers have private information about demand and the manufacturers undertake greening efforts. First, we consider a base model with one manufacturer and retailer to analyze the manufacturer's greening decisions under demand information sharing. Then, we extend the model by considering two competing supply chains, each comprising one manufacturer and one retailer. Using game theory, we examine the greening decisions and impacts of competition on the supply chain, considering both Cournot (quantity) and Bertrand (price) competition. Our results suggest that information sharing improves the greening level on the one hand and distorts the wholesale price upward in response to an accurate demand signal on the other hand. We show that information sharing is most likely to occur if the manufacturer is efficient in greening efforts in both Cournot and Bertrand competition. We find that (a) Bertrand (Cournot) competition with information sharing leads to higher (lower) equilibrium greening levels in the supply chain; (b) The equilibrium greening level of the products decreases in Cournot while increases in Bertrand competition; (c) The equilibrium greening level is higher in Bertrand than Cournot under information sharing. Past literature on information sharing suggests that full information sharing reduces consumer surplus and social welfare. Contrary to this result, we show that it depends on competition mode. With intense competition, consumer surplus and social welfare are higher in Bertrand competition in full information sharing than in no information sharing. Our results provide novel insights into how the mode of competition impacts the greening effort by sharing demand information in competing supply chains.