Does Looking Trustworthy Facilitate Forecast Sharing in a Supply Chain? An Experimental Study

Information is crucial to the supply chain because it provides the foundation for managerial decisions. Inventory decisions often depend on private forecast shared by retailers. Facing uncertain demand, suppliers tend to rely on nonverifiable retailers’ reports known as “cheap talk”. Problems of misreporting and mistrust can arise. With a purpose to motivate trust and honesty (i.e., trustworthiness) in supply chain contracting, our study investigates visual social factors affecting decision-makers. In controlled experiments, we explore the effect of human faces on the retailer’s information-sharing behavior and supplier’s inventory responses. We observe that the channel efficiency improves when facial identities of retailers are revealed to the supplier. However, the change in profitability is connected to the difference in facial trustworthiness. The experimental data evidence a negative moderation effect of facial trustworthiness on the retailer’s reporting behavior and the supplier’s trust. Whereas the trusting supplier still allocates inventory favoring trustworthy look over untrustworthy or hidden faces