The Inventory Billboard Effect on Information Sharing in Competing Supply Chains with Production Diseconomies
Abstract
The Billboard effect in operations management indicates that the increasing shelfspace allocated to a product has a positive effect on the product demand. This paper studies the billboard effect on the vertical information sharing strategy of competing supply chains in an environment with production diseconomies. We consider a model of two competing supply chains. Each supply chain consists of one retailer and one manufacturer, and the retailers engage in Cournot (quantity) competition. We analyze how equilibrium information sharing strategy, wholesale price and retail quantity are affected by the billboard effect. Our results show that with the existence of production diseconomies, information sharing benefits the supply chain and the billboard effect increases the value of information sharing.