Information sharing in a dual channel with an agency-selling platform

Abstract

The dual-channel sales based on an agency-selling platform and a physical retailer have been one of the most common supply chain structures for a variety of consumer products. This paper studies the information sharing decisions of an agency-selling platform and a physical retailer in a dual-channel supply chain where a supplier sells a product through these two channels. We find that the commission rate and channel competition intensity play an important role in determining the equilibrium sharing decisions. In particular, a large commission rate prevents the platform from sharing information with the supplier because the platform is worried that the shared information will be used by the supplier to optimize retail sales and thus cause the demand transfer from the platform to the retailer. By contrast, a large competition intensity forces the retailer to share information to seek a strong responsiveness of the retail price to updated demand. Interestingly, both the platform and the retailer may encounter a prisoner's dilemma and the undesirable “lose-lose” outcome could potentially be mitigated if the platform reduces its information accuracy. Moreover, the supplier's decision to buy information will make all three players more profitable when it cannot obtain information for free. This research highlights how equilibrium information sharing decisions are affected by the interaction between the platform's agency-selling mode and the wholesale price contract used in the retail channel. The findings also provide useful insights for managers to make their information sharing decisions.