Abstract:

This paper studies information sharing in a channel where the manufacturer possesses better demand-forecast information than the downstream risk-averse retailers. We focus on voluntary information sharing, where the manufacturer makes the sharing decision ex post after receiving the forecast. Before setting the retail prices, the retailers will make a rational inference on the forecast based on the manufacturer’s wholesale price as well as the fact that it can share but has decided not to share. We find, first, the manufacturer will share its forecast only if the forecast is extremely big or small; otherwise, it will choose a pooling wholesale price where the retailers cannot infer the forecast. Second, the more risk-averse the retailers are or the stronger the competition among the retailers is, the less likely the manufacturer will share its forecast with the retailers.

Key words: channel, voluntary information sharing, signaling, competition intensity, risk aversion