Manufacturer Encroachment With Quality And Cost Investment Under Asymmetric Information

With the development of e-commerce,manufacturer encroachment is becoming more and more common.In practice,due to market volatility,demand information between manufacturers and retailers may be asymmetric.This thesis investigates manufacturer encroachment under asymmetric demand information to examine the effects of encroachment on quality,cost investment and profits for chain members.Firstly,this thesis considers the effects of manufacturer encroachment on profits of chain members and product quality under asymmetric information.Using signaling game to solve the Stackelberg game between the manufacturer and the retailer,this thesis finds that encroachment leads to a lower quality when the manufacturer’s direct selling cost is intermediate.The manufacturer always benefits from encroachment,and the retailer benefits from encroachment under an intermediate direct selling cost of the manufacturer.Compared to the full and no information cases,asymmetric information may increase quality when direct selling is relatively efficient while decrease quality otherwise.The manufacturer may prefer to keep information disadvantages when his direct selling cost is relatively large and the prior probability of large market size is high.Additionally,the informed retailer may be willing to share information in the case of asymmetric information when direct selling is efficient.As a result,the chain members reach a consensus on information sharing when the manufacturer’s direct selling cost is quite small or relatively large.Secondly,this thesis takes into account the impact of manufacturer encroachment on cost investment under asymmetric information,and using signaling game,this thesis finds the manufacturer always benefits from encroachment,while the retailer benefits from encroachment when manufacturer’s selling cost is high.When manufacturer’s selling cost is low,the manufacturer increases production cost investment.When the direct selling cost of manufacturers is high,both the manufacturer and the retailer can obtain higher profits under perfect information,and supply chain members reach a consensus on information sharing.