A Stackelberg model of pricing of complementary goods under information asymmetry

We consider a duopoly market where two separate firms offer complementary goods in a leader-follower type move. Each firm has private forecast information about the uncertain market demand and decides whether to share it with the other firm. We show that information sharing would benefit the leader firm but hurt the follower firm as well as the total system if the follower firm shares information unconditionally. We then devise a “simple to implement” information sharing scheme under which both firms and the total system are better off. We also provide several interesting managerial insights and establish the robustness of the model in managing a supply chain through our analytical and simulation results.