The value of information acquisition and sharing on an online intermediary platform

You Zhao, Jianxin Chen, Ping Shi, Rui Hou

Abstract: In practice, the online intermediary platform (e.g., JD.com and Amazon.com) not only acts as an e-tailer but also provides a marketplace for online retailers. This study investigates an online intermediary’s incentive for sharing private market demand information with the manufacturer when it is costly for the online retailer to acquire that information from the intermediary. We consider a hybrid-format supply chain consisting of a manufacturer, an online retailer, and an online intermediary. The online intermediary and retailer engage in Bertrand (price) competition. The retailer purchases products from the manufacturer and sells them through the online intermediary by paying an agency fee, while the online intermediary resells them as an e-tailer. Our findings indicate that the online intermediary may be willing to disclose market demand information to the manufacturer voluntarily under certain conditions. Interestingly, we find that when the information-acquisition cost is moderate, the retailer’s information-acquisition decision depends on the online intermediary’s information-sharing decision. Further, we demonstrate that sharing information is beneficial for the manufacturer, retailer, and online intermediary when the information-acquisition cost is moderate if and only if the competition intensity coefficient is low and the agency fee is high, or the competition intensity coefficient is high. However, when the information-acquisition cost is low or high, sharing information with the manufacturer would be detrimental to the retailer, i.e., a win–win–win outcome might not be achieved. These findings suggest that the three interacting forces of the information-acquisition cost, competition intensity coefficient, and agency fee steer equilibrium decisions for supply chain members.