Stability of Information-Sharing Alliances in a Three-Level Supply Chain
33 Pages Posted: 5 Jan 2010
Date Written: September 1, 2009
In their recent paper, Leng and Parlar (L&P) (2008) analyze information-sharing alliances in a three-level supply chain (consisting of a manufacturer, a distributor, and a retailer) which faces a nonstationary end demand. Supply chain members can share demand information, which reduces information distortion and thus decreases their inventory holding and shortage costs. We expand the results from L&P by considering dynamic (farsighted) stability concepts. We use two different allocation rules and show that under some reasonable assumptions there should always be some information sharing in this supply chain. We identify conditions under which the retailer in a stable outcome shares his demand information with the distributor, with the manufacturer, or with both remaining supply chain members.
Keywords: inventory/production, information sharing, alliance stability, coalitions
JEL Classification: C71, D82
Suggested Citation: Suggested Citation