Optimal ordering decision and information leakage preference under asymmetric forecast signal

This work investigates the retailers’ sourcing decisions with or without information leakage and studies the impact of the forecasting accuracy on supply chain members’ preferences for information leakage. To derive the retailers’ optimal sourcing quantities under two scenarios, one without and one with information leakage, we formulate a supply chain in which a common manufacturer offers a wholesale price contract to two competing retailers, one of whom (the incumbent) has private forecasting information about the market demand and the other one (the entrant) does not. We find that the incumbent with information advantage may have a worse profit and lower market share than the entrant under no information leakage. We show that the incumbent has an incentive to impact the entrant’s sourcing decision by managing her own sourcing quantity reflecting private forecasting information under information leakage. Then, we compare the supply chain members’ performances under different conditions; counterintuitively, the result shows that information leakage may benefit the manufacturer when the prior probability of the booming market is low enough or the forecasting signal is not sufficiently accurate even if the incumbent’s forecasts that the market will be slack; we show that the information leakage will benefit the incumbent when the forecasting information is not sufficiently accurate and the prior probability of the booming market is high enough even if she forecasts that the market will be booming; we find that information leakage will hurt the entrant’s profit when the incumbent forecasts that the market will be slack, or when the market will be booming under the condition of the forecasting information is not sufficiently accurate and the prior probability of the booming market is high enough. Meanwhile, we find that the many-win condition will never occur in our model setting, and the preferences of all three supply chain members for information leakage will never become concert.