Will a supplier benefit from sharing good information with a retailer?

Information sharing has been known to be crucial in supply chain management. Prior empirical finding reveals that suppliers in practice tend to help their trading partners improve forecast accuracy. This paper examines this issue and explores the up-down (from an upstream supplier to a downstream retailer) strategic information sharing issues in a two-echelon supply chain. We first model a supply chain with forecast updating and returns policy. The forecast updating scheme adopts the Bayesian approach with unknown mean and unknown variance. We then proceed to analytically explore the effects of forecast updating on the supplier and the retailer. Our analysis has revealed that: 1. Demand information with low relevance can lead to a loss to the retailer. 2. In the absence of returns policy, the supplier has an incentive to provide "bad information" which may be harmful to the retailer. 3. The supplier will provide "good information" to the retailer only under the returns policy. 4. With up-down information sharing, win-win coordination can be achieved by using a proper returns policy. Many of these results can supplement and challenge the prior research findings that supplier has good incentive to help retailers in improving forecast. Demand information with low relevance can lead to a loss to the retailer.A supplier has incentive to provide "bad information" to the retailer in the absence of returns policy.Reveal that a supplier will provide "good information" to a retailer under the returns policy.Coordination can be achieved by using a proper returns policy.New insights which supplement prior research findings on information sharing incentive.