Coordination of information sharing in a supply chain

In this paper, we study information sharing in a supply chain consisting of one supplier and one retailer, in which both the supplier and the retailer possess partial information on the demand. Under the single price contract, we show that whether a firm reveals its private information depends on the quality (variance) and the correlation of the two firms' information and the other firm's information revelation behavior. For the case that one firm (the retailer or the supplier) has complete information on the demand, the equilibrium is that the firm with complete information conceals its information and another reveals its information. Finally, we show that revenue sharing contract is coordinative, which ensures that both firms share their information completely and the retailer chooses the sale quantity which maximizes the total profit of the supply chain. This study shows that the members in a supply chain must sign coordinative contract in order to ensure that they share their information.