Information sharing and information concealment in the presence of a dominant retailer

The dramatic development of large retail outlets has transferred the dominant power from suppliers to retailers, who possess more plentiful and more accurate information in order to take preemptive action. To better understand the issue of information dissemination in the presence of a dominant retailer, we model a market comprising such a dominant incumbent retailer, who knows the terminal market demand as private information and is entitled to dictate her wholesale price while competing in terms of quantity with a weaker entrant retailer. Both retailers purchase products sequentially from a common upstream supplier, who has the power to set the wholesale price only for the entrant. Our analyses of Stackelberg games corresponding to two mechanisms, i.e., information sharing and information concealment scenarios, reveal interesting insights regarding the impact of information dissemination. The analytic solutions confirm that the incumbent absolutely reigns supreme through the wholesale price and order quantity. Both the extent of stabilization of the terminal market demand and the value of accurate information influence the participants' decisions and their relative profits. We unexpectedly discover that the incumbent does not always benefit from information concealment and that the supplier and entrant do not always prefer information sharing. These results are distinctive and explicable. Moreover, the incumbent, the supplier and the entrant could realize the splendid opportunity of a “double-win” or even a “triple-win” situation in certain circumstances.