- February 27, 2013
- Zaragoza Logistics Center, Sala 221
Multiple retailers are considering forming a pooling coalition and delegating inventory management to a benevolent central planner. Each retailer faces uncertain demand and has private information about it due to his proximity to the market. We focus on whether reliable demand information sharing occurs between retailers and the central planner when retailers compete for common inventory. Our game-theoretic analysis shows that retailers have an incentive to distort their reported information and a fully informative Perfect Bayesian Equilibrium is not sustainable.
Furthermore, we study the impact of a) the size of the pooling coalition and b) market uncertainty on the level of trust and trustworthiness of supply chain parties in this setting.
We prove that in an extremely multitudinous pooling coalition or when demand uncertainty is resolved before information transmission, players’ incentives coincide and truth-telling and trusting form an equilibrium. We next test standard game theory predictions in a controlled laboratory setting. We observe that parties cooperate to some extent, both when pecuniary incentives are aligned and misaligned. Our results suggest that a continuum of trust exists, but the level of cooperation varies with the supply chain environment. Competition for common inventory and forecast uncertainty harm the efficacy of forecast sharing.