Supply Chain Information Sharing among Competitors: Profit-Based Participation under Market Shocks
Sharing information can help coordinate supply chain decisions in response to market shocks. Yet, firms must weigh these benefits against the risk of strengthening competitors. We study when competing firms voluntarily join an information-sharing platform to exchange information about market shocks while retaining operational autonomy. Firms differ in information capabilities and decide whether to participate before private signals are realized, creating stochastic information asymmetry. We model participation and quantity decisions as a two-stage dynamic game with incomplete information. For two horizontal competitors, we derive closed-form equilibrium participation strategies that reveal how information power and production efficiency shape participation. Numerical analysis examines more complex supply chain networks. We find that supply chain characteristics impact participation and the level of information asymmetry is a key factor in the equilibrium platform profiles. Firms with similar information power may benefit from joining forces to reduce their competitive disadvantage against higher information power competitors. Cost-inefficient firms may be less willing to participate because their competitors can exploit shared information, and uncertainty can serve as a competitive shield by restricting the actions of more efficient competitors. However, when several competitors join the platform, a cost-inefficient firm may also choose to participate to avoid an informational disadvantage.