Information Acquisition and Sharing in a Vertical Relationship

41 Pages Posted: 28 Aug 2008 Last revised: 29 Aug 2008

See all articles by Liang Guo

Liang Guo

Chinese University of Hong Kong

Ganesh Iyer

University of California, Berkeley - Marketing Group

Date Written: June 2008

Abstract

Suppliers are increasingly acquiring consumer information in a sequential fashion with negligible marginal costs, and influencing downstream retailer actions by sharing the acquired information using either exante mandatory or ex-post voluntary sharing formats. This paper examines the interaction between a manufacturer's optimal strategies for sequential information acquisition on product fit/quality and for information sharing in a vertical relationship. We examine how the flexibility to sequentially control information collection, and how the flexibility in ex-post voluntary information sharing, may influence the manufacturer's equilibrium amount of information acquired.

We show that, when information acquisition is sequential, the manufacturer may not acquire perfect information even if it is costless to do so. This self-restriction in information acquisition follows from the manufacturer's motivation to strategically influence retail behavior. When information acquisition is inflexible and constrained to be either zero or perfect information, the manufacturer will acquire more (less) information under voluntary (mandatory) sharing. Nevertheless, voluntary information sharing will unambiguously lead to more information being generated, because the manufacturer has the option to strategically withhold the disclosure if the acquired information turns out to be unfavorable. Finally, the conditions under which the manufacture prefers a particular sharing format are examined.

Keywords: channel, information acquisition, information disclosure, information sharing, sequential acquisition, vertical relationship

Suggested Citation

Guo, Liang and Iyer, Ganesh, Information Acquisition and Sharing in a Vertical Relationship (June 2008). Available at SSRN: https://ssrn.com/abstract=980506 or http://dx.doi.org/10.2139/ssrn.980506

Liang Guo (Contact Author)

Chinese University of Hong Kong ( email )

CUHK Business School
CUHK
Hong Kong
China
(852)3943-7830 (Phone)
(852)2603-5473 (Fax)

Ganesh Iyer

University of California, Berkeley - Marketing Group ( email )

Haas School of Business
Berkeley, CA 94720
United States

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