Research On Supply Chain Members’ Decisions Considering Information Leakage Under Bertrand Competition

Supply chain achieves coordination and high efficiency through information sharing and cooperation, but this would bring about the information leakage problem which will greatly weak the initiative of supply chain members in information sharing and cooperation. In fact, information leakage may happen as long as information flow exists in a supply chain. Nowadays, information leakage and information sharing have become a conflict which stands in the way of establishing partnerships and information sharing mechanisms in a supply chain. Thus, under the background of current rapid development of e-commerce and deepening cooperation between firms, it is necessary to study supply chain members’ decision-making considering information leakage. More specifically, inspired by the relevant academic work and taking into account the case of firms sharing information and making cooperative pricing under Bertrand competition, this paper studied the decision-making behaviors of supply chain members while facing information leakage. The study of decision-making behaviors includes providing the mechanism of information leakage, the optimal pricing decision and the information strategies of retailers under leakage. Some results obtained could be the theoretical reference for firms in making related decision and provide some inspiration for establishing good information sharing and cooperation mechanism in a supply chain.Firstly, in a supply chain consisting of one supplier and two Bertrand retailers and existing information asymmetry, this paper provided the strategic price information leakage mechanism under Bertrand competition by using game theory to analyze supplier’s decision-making behavior. The results show that supplier will leak retailer’s price information to realize higher profits in most cases, and then, retailer’s private demand information will be leaked out through the price.Secondly, we analyzed retailers’ pricing decision under leakage. By constructing price signaling game model, we obtained optimal pricing decisions under separating and pooling equilibrium, the existence conditions of equilibriums and the information structure of supply chain. Furthermore, we discussed the pricing decision choice of retailer by comparing the profits of retailers under different equilibriums. In addition, we use numerical examples to verify our conclusions.Lastly, we analyzed retailers’ demand information acquisition strategies as theoretical reference for supply chain firms in doing investment for information acquisition under leakage. Surprisingly, the last numerical example shows that the competitive retailers realize higher profits under leakage than non-leakage.