Valuing Uncertainty and Information Sharing Among Retailers

Abstract

The purpose of this paper is to examine the value of information in a vertical supply chain involving a manufacturer selling to Cournot-type retailers that in turn market to consumers. We introduce uncertainty for the retailers and discuss the effects on consumer welfare and general efficiency in the market. Additionally, we investigate whether a retailer operating under certainty would find value in sharing the information with the other retailers. The findings provide a model-based rationale for retail associations.
Keywords: Retail association, Supply chain, Incentive contracts.