Information acquisition and sharing strategies of supply chain with supplier encroachment considering signaling effect

This paper examines demand information value and acquisition strategy for a supply chain composed of a supplier and a retailer under supplier encroachment, and considers the situation that both the enterprises can obtain information directly from the market. The problem is formulated with a Bayesian game model. A signaling mechanism is considered, i.e., the supplier’s demand information will be signaled to the retailer through wholesale pricing. Under the signaling mechanism, this paper analyzes whether it is still worthy to the supplier and the retailer of acquiring information at a non-ignorable cost under dual information asymmetry. Moreover, this paper examines the interaction between channel substitution rate and information acquisition. Furthermore, subsidies for inducing information sharing and the signaling effects on the payoffs are also explored. The results propose strategy selections of encroachment and information acquisition based on cost thresholds. A double information inaccuracy effect is discovered, which comes from the fact that an enterprise receives the signal from another supply chain member as well as acquires information from the market. It is interesting to find that the information inaccuracy does not necessarily have a negative effect due to double information inaccuracy. The inaccuracy rate has a positive effect first and then a negative effect on the payoffs of the supply chain under certain conditions. The value of signaling of demand information is analyzed, revealing that lower substitution rate will make the signaling mechanism have a positive impact on the enterprises payoffs. Some managerial insights are presented in the end.