Manufacturer investment in cost reduction and supplier information sharing

Consider a supply chain setting consisting of a manufacturer and a supplier, in which the former can invest to reduce the latter's production cost, but the cost information is proprietary to the latter. Whether the supplier commits to share his information will have an influence on the manufacturer's investment. Therefore, this paper investigates the relationship between the manufacturer's investment and the supplier's information sharing. By modeling, we discuss how the profits of supply chain members change under the various investment levels in two information sharing ways, that is, with pre-commitment and without pre-commitment, respectively. Our results indicate that, with pre-commitment, the supplier will always choose withhold his information; but without pre-commitment, whether the supplier shares his information depends on the manufacturer's investment level. Generally, the higher investment level, the broader the cost range for disclosure. Moreover, the profits of both supplier and manufacturer are always higher with pre-commitment than without it, which means pre-commitment is more effective to achieve win-win.