Strategic information sharing and competition under cap-and-trade regulation

Published date08 April 2019
Pages639-655
Date08 April 2019
DOIhttps://doi.org/10.1108/IMDS-03-2018-0124
AuthorMan Yu,Erbao Cao
Subject MatterInformation & knowledge management,Information systems,Data management systems,Knowledge management,Knowledge sharing,Management science & operations,Supply chain management,Supply chain information systems,Logistics,Quality management/systems
Strategic information sharing
and competition under
cap-and-trade regulation
Man Yu and Erbao Cao
School of Economics and Trade, Hunan University, Changsha, China
Abstract
Purpose The purpose of this paper is to investigate whether truthful information sharing can be achieved
via informal cheap talk in a competitive setting, and how carbon emission constraint and information-sharing
modes (no information sharing, partial information sharing and public information sharing) interact with
each other under cap-and-trade regulation.
Design/methodology/approach This paper establishes an emission-dependent supply chain consisting
of a manufacturer, an incumbent retailer who has superior demand information and a new entrant retailer.
The manufacturer abates carbon emissions under the pressures of government environmental regulation and
consumerseco-friendly concern. The research formulates a multistage game to explore every partys decision
and the implications of information-sharing modes.
Findings The results show that truthful information sharing can be achieved when the manufacturer
decides both the wholesale price and carbon emission abatement. The results also show that the incumbent
retailers information-sharing decision highly depends on the manufacturers capacity in abating carbon
emissions and the demand uncertainty.
Originality/value The research adds value to information management and sustainable production
literature. This work emphasizes the interaction between the information flow and material flow. Not only it
investigates the factors that affect information-sharing modes from a new point of view when considering
carbon emission constraint, but also provides operational strategies for manufacturers to make more profit
when facing asymmetric information and emission regulation.
Keywords Strategy, Information sharing, Impacts, Cap-and-trade, Carbon emission abatement
Paper type Research paper
1. Introduction
In the big data era, the availability of advanced data-collecting technologies enables retailers
to acquire rich market data to obtain demand information. Researchers documented that
many retailershave started to share such informationwith other firms by signing contractsor
via informal cheaptalk (Dominguez et al., 2018; Chu et al., 2017). However, there are stillsome
strategicissues in achieving informationsharing in a competitive situation.On the other hand,
in production process, firms take costly measures to reduce carbon emissions due to the
pressures ofgovernment emission regulationsand consumerseco-friendly awareness (Gh osh
and Shah, 2015; Tang et al., 2018); little attention has been paid to environmental regulation
implications in information-sharing literature. Therefore, this paper aims to investigate
whether information can be truthfully shared via informal cheap talk and the interaction
between information-sharing modes and carbon emission constraint.
There is substantial literature on supply chain management indicating the benefits of
information sharing, such as making better decisions on resource utilization and reducing
production costs. As an example of this principle in practice, Wal-Mart shared forecast
demand information with WarnerLambert,which makes Listerine mouthwash.An amazing
outcome of this information sharing is that Listerines production scheduling ran more
smoothly, and Wal-Marts in-stock position improved from 85 to 98 percent (Seifert, 2003).
However, firms with superior demand information may strategically make decisions,
especially in a competitive situation. The well-informed retailers can share information
Industrial Management & Data
Systems
Vol. 119 No. 3, 2019
pp. 639-655
© Emerald PublishingLimited
0263-5577
DOI 10.1108/IMDS-03-2018-0124
Received 26 March 2018
Revised 17 September 2018
Accepted 24 October 2018
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0263-5577.htm
639
Strategic
information
sharing and
competition
only with their manufacturer (Li and Zhang, 2008), with their competitors (Dominguez et al.,
2018) or publicly (Shamir and Shin, 2016). For example, Boeing reported its approximated
$5 trillion marketforecast for the next two decades in 2015. StorageTechnology Corporation,
a data storage technology company, announced the optimistic market demand information
publicly, whereas Aleton WebSystemsIncorporated, a network equipment producer, released
pessimistic market information publicly (Shamir and Shin, 2016). Although the incentives of
information sharing have been studied, little research has studied when and what kind of
information should be shared, which are essential decisions in firmsinformation
management. Moreover, the information shared via informal cheap talk sometimes is very
difficult to verify. Firms may manipulate their private information, which results in great
losses (Shamir and Shin, 2016; Scheele et al., 2018). Chu et al. (2017) suggest that truthful
informationsharing can be achieved when the manufacturer takes multiple actions. However,
their result is based on a simple supply chain with one retailer and one manufacturer. We
wonder if it is possible for the retailer to share information in a competitive setting.
Supply chain management requires the integration of material flow and information
flow. Therefore, firmsproduction environment should not be neglected when studying
the operational implications of information sharing. Carbon emissions from production
are considered to be a main driving force of global warming, which has attracted a
worldwide concern since it is believed to be a big threat to the health of human beings
(Krass et al.,2013).Asaresult,takingeffectivemeasures to alleviate the affection of
human being activities on global warmingisasignificanttaskaroundtheworld.
To achieve this goal, carbon cap-and-trade regulation is adopted by many countries and
areas like Europe Emissions Trading System and China. On the other hand, consumers
are shown to concern productsimpact on environment and gradually shift their
purchasing choices toward eco-friendly items (Kanchanapibul et al., 2014; Cao and Yu,
2018; Bouchery et al., 2017). Under the pressures of governmental regulation and
consumerseco-friendly awareness, companies have started to make costly efforts to abate
carbon emissions, such as installing emission control equipment and researching new
environment-friendly technologies (Zhu and He, 2017).
In the existing literature, little research has investigated the impact of carbon emission
constraint on information sharing. Although Khan et al. (2016) studied information sharing
considering emission constraint, they focused on the information on yield losses and
neglected the strategic issues. To fulfill this gap, we aim to address the following questions:
RQ1. Whether the retailer who has superior information is able to truthfully share
information via cheap talk in a competitive environment, and whether the retailer
would share information with its competitor?
RQ2. How does carbon emission constraint affect the information-sharing mode chosen
by the retailer?
RQ3. What are the manufacturers optimal strategies under different information-
sharing modes?
RQ4. What is the impact of information sharing on the manufacturersoptimaldecisions?
RQ5. Does the uninformed competitor always benefit from information sharing?
Previous literature has studied the cases in which information is shared by means of
cheap talk (Chu et al., 2017; Shamir and Shin, 2016). In line with their work, we employ a
multistage game of incomplete information to study strategic information-sharing issues.
As manufacturers may provide the same products to more than one retailer, a stylized
supply chain structure consisting of one manufacturer and two retailers is established. To
distinct firmsability of obtaining private information, similar to Anand and Goyal (2009)
640
IMDS
119,3

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT