Rebate competition and information sharing in supply chains

This thesis presents three essays in operations management‒one on supplier audit information sharing and two on manufacturer rebate competition. The first essay studies the incentive for competing manufacturers to share supplier audit information in a market with some consumers who boycott a manufacturer if supplier responsibility violations occur. Based on the audit information, each manufacturer either continues to source from an existing non-responsible common supplier who may have a high or low level of supplier responsibility risk, or switches to a new responsible supplier who charges a cost premium. We fully characterize the manufacturers' equilibrium audit sharing decisions and the subsequent sourcing strategies, and show how they depend on parameters such as the relative cost premium of the responsible supplier, the expected demand loss of sourcing from a high-risk non-responsible supplier, the prior probability of the non-responsible supplier to be high-risk, and the audit information accuracy. We show that the existence of an audit-sharing platform does not always lead to more responsible sourcing, even though this is a common motivation for establishing these platforms. A manufacturer who sources from the responsible supplier may benefit from a higher relative cost premium when it induces the manufacturers to cease sharing audit information. A manufacturer whose sourcing decision depends on the audit information may be hurt when the information becomes more accurate. We also find similar counter-intuitive results when there is a change in some other parameters. The next two essays study the problem of manufacturer rebate in a supply chain with two competing manufacturers selling to a common retailer. In the second essay, we investigate the incentives of competing manufacturers to offer rebates to consumers in a model with deterministic demand. We fully characterize the manufacturers' equilibrium rebate decisions and show how they depend on parameters such as the fixed cost of a rebate program, market size, the redemption rate of rebate, the proportion of rebate-sensitive consumers in the market and competition intensity. Interestingly, more intense competition induces a manufacturer to lower rebate value or stop offering rebate entirely. Without rebate, it is known that more intense competition hurts the manufacturers and benefits the retailer. With rebate, however, more intense competition could benefit the manufacturers and hurt the retailer. We find similar counter-intuitive results when there is a change in some other parameters. We also consider the case when the retailer subsidizes the manufacturers sequentially to offer rebate programs. We fully characterize the retailer's optimal subsidy strategy, and show that subsidy always benefits the retailer but may benefit or hurt the manufacturers. When the retailer wants to induce both manufacturers to offer rebate, he always prefers to subsidize the manufacturer with a higher fixed cost first. Sometimes the other manufacturer will then voluntarily offer rebate even without subsidy. In the third essay, we investigate the incentive for a retailer to share demand information with two rebate-offering manufacturers in a model with stochastic demand. Without rebate, it is known that a retailer has no incentive to share information under linear production cost due to the negative effect of double marginalization. With rebate, however, the retailer may have an incentive to share so that the manufacturers can adjust their rebate decisions in response to updated demand information. Such an incentive depends on the proportion of rebate-sensitive consumers, competition intensity, and whether the retailer can charge a side payment for the information. Our analysis shows that the retailer will not voluntarily share information with a monopolistic manufacturer but he may voluntarily share information with none, one or both of the manufacturers when there is competition. Interestingly, we find that more intense competition or a smaller rebate-sensitive segment may benefit a manufacturer when it induces the retailer to share information with her. When side payment is feasible, we compare concurrent contracting and sequential contracting, and show that concurrent contracting induces the system-optimal information sharing decision and is preferred by the retailer over sequential contracting.