Information Sharing in the Hybrid-Format Supply Chain

In a hybrid-format supply chain, an intermediary serves as a reseller as well as a marketplace. This paper studies the intermediary’s incentive to share the privately observed demand in- formation with its upstream supplier when the supplier can also engage in the marketplace offered by the intermediary in a hybrid-format model. Conventional wisdom suggests that an intermediary is averse to sharing the demand information with its supplier due to the double marginalization effect of information sharing. We show that an intermediary may voluntarily establish an information sharing channel with its supplier when the intermediary engages in a hybrid-format supply chain. The intuition is that information sharing shifts power upstream, which enhances the supplier’s incentive to engage in the marketplace. The intermediary benefits from the lessened double marginalization effect and revenue sharing from the marketplace. This strategic role of information sharing is in contrast to most previous literature. We also find that when the proportional fee is not high, the supplier prefers to engage in the marketplace regardless of channel substitutability; when the proportional fee and channel substitutability is high, the intermediary withholds information and the supplier only resells through the intermediary. Our findings not only complement the emerging hybrid-format model literature but also develop relatively new insights on information sharing issue in the supply chain.