The Quantity Flexibility Contract and Supplier-Customer Incentives
Management Science
Supply Chain Coordination Under Channel Rebates with Sales Effort Effects
Management Science
Information Sharing in a Supply Chain with Horizontal Competition
Management Science
The Effect of Collaborative Forecasting on Supply Chain Performance
Management Science
Strategic Spot Trading in Supply Chains
Management Science
Contracting and Information Sharing Under Supply Chain Competition
Management Science
Confidentiality and Information Sharing in Supply Chain Coordination
Management Science
Incentives for Retailer Forecasting: Rebates vs. Returns
Management Science
Trust in Forecast Information Sharing
Management Science
Does a Manufacturer Benefit from Selling to a Better-Forecasting Retailer?
Management Science
Trust in Forecast Information Sharing
Management Science
Sourcing Flexibility, Spot Trading, and Procurement Contract Structure
Operations Research
Contract analysis: A performance measures and profit evaluation within two-echelon supply chains
Computers and Industrial Engineering
Revenue Sharing and Information Leakage in a Supply Chain
Management Science
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We study the effect of downstream competition on incentives for demand forecast investments in supply chains. We show that with common pricing schemes, such as wholesale price or two-part tariffs, downstream firms under Cournot competition overinvest in demand forecasting. Analyzing the determinants of overinvestment, we demonstrate that under wholesale price contracts and two-part tariffs, total demand forecast investment can be very significant, and as a result, the supply chain can suffer substantial losses. We show that an increased number of competing retailers and uncertainty in consumer demand tend to increase inefficiency, whereas increased consumer market size and demand forecast costs reduce the loss in supply chain surplus. We identify the causes of inefficiency, and to coordinate the channel with forecast investments, we explore contracts in the general class of market-based contracts used in practice. When retailers' forecast investments are not observable, such a contract that employs an index-price can fully coordinate the supply chain. When forecast investments are observable to others, however, the retailers engage in an “arms race” for forecast investment, which can result in a significant increase in overinvestment and reduction in supply chain surplus. Furthermore, in that case, simple market-based contracts cannot coordinate the supply chain. To solve this problem, we propose a uniform-price divisible-good auction-based contracting scheme, which can achieve full coordination when forecast investments are observable. We also demonstrate the desirable properties for implementability of our proposed coordinating contracting schemes, including incentive-compatible and reliable demand forecast information revelation by the retailers, and being regret-free.