, Volume 11, Issue 2, pp 263-287

Manufacturer marketing initiatives and retailer information sharing

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Abstract

This research examines a retailer’s incentive to share information with its supplier when the supplier can also undertake initiatives to increase retail demand. It is well known that a retailer is averse to sharing market information with a manufacturer due to concern for a manufacturer’s strategic use of such information. This research shows that despite such strategic exploitation of market information, a retailer may want to establish information sharing channels with its supplier. Information sharing essentially shifts power upstream which, in turn, enhances the manufacturer’s incentive to bear costs to boost retail demand: the manufacturer is induced to invest merely by knowing that information is on its way. Hence, the retailer benefits from information sharing ex ante despite the costly ex post exploitation by the manufacturer. This finding is a stark contrast to the most of previous results which consistently point out how bad it is for the manufacturer to have the retailer’s demand information before setting prices. In fact, due to the investment effect, information sharing can lead to gains for the retailer, manufacturer, and consumers alike.

The authors thank the editor, Sridhar Moorthy and two anonymous reviewers for their very constructive comments which improve the paper greatly during the review process. They also thank Anil Arya, Anthony Dukes, Robert F. Gox, K. Sudhir, and participants at 2012 Management Accounting Section meeting for their very helpful comments. The authors contributed equally and their names are listed in alphabetical order.