Competing Negotiations and Information Sharing between Vertical Chains

This paper considers a model with two competing supply chains where production costs are private information within a supply chain, but manufacturers can decide to share this information with the rival manufacturer. In contrast to existing literature, we study bottom-up negotiations, where dealers make offers consisting of a price and a quality level to consumers before negotiating with the manufacturer, as is common in several industries. We show that information sharing can increase competition, but helps firms to coordinate their quality investments more efficiently. We consider different information-sharing regimes and characterize the conditions for information sharing to be profitable, and show that it can be pro- or anti-competitive