Store brand introduction and quantity decision under asymmetric cost information in a retailer-led supply chain

Abstract The paper focuses on the topic of introducing store brands under asymmetric cost information in a retailer-dominant supply chain. We assume that the manufacturer privately knows the production cost for national brands, while the retailer only knows the distribution of the cost information. There exists a signal game between the manufacturer and the retailer after introducing store brands. In such case, when the true production cost for national brands is high, the manufacturer has to distort downward the production quantity to make the retailer believe the production cost is indeed high. Such distortion may amplify double marginalization. As a result, the retailer becomes worse off while the manufacturer becomes better/worse off from introducing store brands. In addition, the manufacturer does not share information to the retailer without introducing store brands, while the manufacturer may prefer to sharing information to the retailer with introducing store brands.

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