Selective Information Sharing of a Multi-Product Manufacturer

This paper identifies strategic reasons for a multi-product manufacturer to selectively share information with its different suppliers. The traditional result in strategic ex-post disclosure settings is that a manufacturer wants to withhold good news from its suppliers, so that the suppliers will not increase their input prices, implementing the seminal "unraveling" result leading to full disclosure. In contrast, on account of the interdependencies arising from the multi-supplier-multi-product structure, we find that the manufacturer always discloses its information to one supplier but may concurrently withhold the same information from a second supplier, engaging in selective information sharing. Selective information sharing in this setting arises because a price change of a supplier affects multiple products that require the same input and affects the pricing decision the other supplier that delivers a complementary input, creating trade-offs in the manufacturer's disclosure preferences. Selective information sharing can arise even when the suppliers can exchange information among themselves.