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Unformatted text preview: her partners abusing
information and reaping all the benefits from information sharing. For example, supply
chain partners seldom share information that relates to sensitive cost data, e.g.,
production yield data or purchase price of parts. This is consistent with economists
finding that a powerful monopolistic or monopsonistic partner can extract all economic
profit from his or her partner, but one way of defending a positive profit for the weaker
party is to keep the cost hidden and maintain informational superiority. The profit
associated with superior information is often called the informational rent
Even when each partner is guaranteed a positive gain in return for information
sharing, each partner can play a non-cooperative game and haggle over how much. This may potentially lead to a failure to share information. Thus, trust and cooperation
become critical ingredients in a supply chain partnership. On the other hand, trust needs
to be rationalized by a relevant economic return. Cooperative game theory  offers a
starting point to the resolution of the problem, but reality is much more complicated with
many additional factors and special considerations.
Another concern associated with information sharing is the confidentiality of
information shared. Suppose, for example, that a supplier supplies a critical part to two
manufacturers who compete in the final product market. Either manufacturer would not
share information (like sales data) with the supplier unless it is guaranteed that the
information is not leaked to the other manufacturer. But the situation becomes tricky if
the supplier and one of the two manufacturers are the same company.
Note also that information sharing in certain settings can be a subject of antitrust
regulations. Suppose that two retailers regularly share with the supplier their demand
projection for the next ten weeks. The projection by one retailer may implicitly signal the
plan of a sales/promotion campaign in some future week. When this information is
relayed to the other retailer through the sup...
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- Fall '08
- Industrial Engineering