Research On Signaling Product Quality In Supply Chains Via Corporate Social Responsibility Choices

With the rapid development of supply chain collaboration,information sharing has become an important topic in the field of supply chain management,and attracted wide attention from practitioners to the academia.Since information sharing in supply chain can effectively alleviate the bullwhip effect and improve the efficiency of supply chains,the value of information sharing has been recognized widely.Usually,information sharing can be achieved in a direct way or in an indirect way.At present,direct information sharing has been fully studied,but for indirect information sharing,it is still in its infancy.The existing literature mainly focuses on the sharing of downstream demand information,while less attention is paid to product quality information of upstream core firms.In fact,on the one hand,downstream firms have the motivation to acquire quality information of upstream products so as to avoid the risk conduction effect caused by upstream product quality accidents;on the other hand,under the information-asymmetry conditions,a high-quality firm also has the motivation to disclosure private information quality,aiming at improving consumers’ product quality belief to promote the market demand and maximize its profit.It is well known that direct information sharing depends on the hardware systems with information collection and information transmission such as EDI or POS,while indirect information sharing is more concerned with the choice of signaling tools.Taking corporate social responsibility(CSR)choice as a signaling tool,this paper focuses on the question of how a firm in supply chain indirectly shares the product quality information.Specifically,this paper first constructs a basic signaling model of the product quality information in supply chains,investigates the characteristics of CSR behaviors that can convey product quality information,and depicts the CSR level with the most signaling efficiency.Then this paper extends the basic model to the case of various market environments,examines the feasibility of indirectly sharing quality information via CSR strategy,and studies the effects of the corresponding exogenous variables on the above characteristics and level of CSR behavior,and the profitability of supply chain firms.The main innovative contributions of this paper are as follows.Firstly,under the situation that an upstream firm owns private quality information,we examine the feasibility of indirectly sharing quality information between a downstream firm and consumers via CSR strategy in the sense of the separating Pefect Bayesian Equilibriums.We build a signaling model including an upstream manufacturer,a downstream retailer and final consumers.The sequence of the model is as follows: firstly,the manufacturer chooses a CSR level and a wholesale price according to its will to share quality information.Then after observing the CSR level to form Posterior Bayesian belief on quality(and then form the expected demand),the retailer determines its order and retail price.Finally,consumers determine whether to purchase according to their Posterior Bayesian belief on quality and the retail price.Based on the separating Pefect Bayesian Equilibriums,we investigate the feasible conditions for CSR strategy to signal product quality information and to realize the indirect sharing of product quality information.Further,we select the most effective CSR behavior by the intuitive criterion.These results indicate that the private product quality information of the midstream and upstream firms in the supply chain can be shared indirectly with the downstream firms via their CSR strategy,and thus expands the research that mainly focuses on the question of how to signal downstream demand information to the upstream.firms.Secondly,we study the effects of the corresponding exogenous variables on the characteristics of the CSR behaviors that can convey product quality information,the CSR level with the most signaling efficiency,and the profitability of the supply chain firms.The CSR level with the most signaling efficiency increases in the marginal production cost and the utility of high quality products,decreases in the utility of low quality products,and decreases in the low-quality manufacturer’s CSR marginal cost,but is independent of the high-quality manufacturers’ CSR marginal cost.The high-quality manufacturer’s profit decreases in its CSR marginal cost and marginal production cost,and increases in the utility of low quality products,the utility of high quality products and the low-quality manufacturer’s CSR marginal cost,respectively.These results indicate that the CSR strategy with the most signaling efficiency and the profitability of the supply chain firms will be affected by the operation factors,and thus provide a theoretical reference for the supply chain firms to improve their profitability under the condition of signaling product quality information.Finally,we investigat the feasibility of indirect sharing mode of CSR strategy under various market conditions by expanding the basic signaling model to various market conditions,such as there exist informed consumers,consumers with CSR preference,dual channels or information transmission in different directions.We build signaling models under these market conditions,and investigate the feasible conditions for CSR strategy to signal product quality information based on the separating Pefect Bayesian Equilibriums.Further,we select the most effective CSR behavior by the intuitive criterion,characterize the information cost of indirect information sharing via CSR behaviors,and examine the effects of the corresponding exogenous variables on the CSR level with the most signaling efficiency and the profitability of the supply chain firms.These results indicate that it is still feasible to signal quality information via CSR choices under the above market conditions,and provide supply chain managers indirect methods on sharing product quality information except the existing direct way,with an implication on choosing a direct or an indirect way to sharing information conditional on a known cost of direct information sharing.