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This paper determines categories of contracts that facilitate vertical information sharing in a supply chain while precluding horizontal information leakage among competing newsvendors. We consider a supply chain in which retailers replenish inventory from a common supplier to satisfy uncertain demand and are engaged in newsvendor competition. Each retailer has imperfect demand information. Yet one of the retailers (the incumbent) has a more accurate demand forecast than the other (the entrant). Information leakage among such competing retailers precludes vertical information sharing and is often the reason for many retailers to abandon collaborative forecast-sharing initiatives, leading to suboptimized supply chains. We show that whether a contract can prevent information leakage depends on how the inventory risk (i.e., cost of supply–demand mismatch) is allocated among the supplier and retailers in conjunction with the allocation of profits. We categorize contracts according to how they allocate inventory risk among firms when compared with a wholesale‐price contract. This comparison yields four mutually exclusive and collectively exhaustive categories of contracts. A downside-protection contract is one that effectively reduces retailers’ cost of excess inventory by shifting some of their overage cost to the supplier. Examples of such contracts include buy-back and revenue-sharing contracts. An upside-protection contract is one that effectively increases retailers’ cost of inventory shortage by shifting some of the supplier’s underage cost to retailers. Examples of such contracts include penalty and rebate contracts. A two-sided protection contract combines the properties of the previous two categories. A no-protection contract is one that fails to shift firms’ cost of inventory shortage or excess from one to the other. Examples of such contracts include wholesale-price and two-part tariff contracts. We show that no-protection contracts, which are extensively used in practice, cannot prevent information leakage, whereas others may do so. We also show that preventing information leakage could be costly for the supply chain (i.e., low channel efficiency). We conclude by illustrating how our unified framework to study a variety of contracts can enable a firm to determine the best-performing contract (among many) that precludes information leakage while almost coordinating the channel. For example, we show why buy‐back contracts perform significantly better than revenue‐sharing or rebate contracts. This paper was accepted by Serguei Netessine, operations management.

E-book sales surged after Amazon introduced the Kindle e-reader at the end of 2007 and accounted for about one quarter of all trade book sales by the end of 2013. Amazon's aggressive (low) pricing of e-books led to allegations that e-books were bankrupting brick and mortar book booksellers. Amazon's commanding position as a bookseller also raises concerns about monopoly power, and publishers are concerned about Amazon's power to displace them in the book value chain. I find little evidence that e-books are primarily responsible for the decline of independent booksellers. I also conclude that entry barriers are not sufficient to allow Amazon to set monopoly prices. Publishers are at risk from Amazon's monopsony (buyer) power and so sought “agency” pricing in an effort to raise the price of ebooks, promote retail competition, and reduce Amazon's influence as an e-retailer. (In the agency pricing model, the publisher specifies the retail price with a commission for the retailer. In a traditional, “wholesale” pricing model, publishers sell a book to retailers at a wholesale price and retailers set the retail price.) Although agency pricing was challenged by the Department of Justice, it may yet prevail in some form as an equilibrium pricing model for e-book sales.

The common wisdom is that a retailer suffers when its wholesale supplier encroaches on the retailer's operations by selling directly to final consumers. We demonstrate that the retailer can benefit from encroachment even when encroachment admits no synergies and does not facilitate product differentiation or price discrimination. The retailer benefits because encroachment induces the encroaching supplier to reduce the wholesale price in order not to diminish unduly the retailer's demand for the manufacturer's wholesale product. The lower wholesale price and increased downstream competition mitigate double marginalization problems and promote efficiency gains that can secure Pareto improvements.

We consider a supply chain with a retailer and a supplier: A newsvendor-like retailer has a single opportunity to order a product from a supplier to satisfy future uncertain demand. Both the retailer and supplier are capital constrained and in need of short-term financing. In the presence of bankruptcy risks for both the retailer and supplier, we model their strategic interaction as a Stackelberg game with the supplier as the leader. We use the supplier early payment discount scheme as a decision framework to analyze all decisions involved in optimally structuring the trade credit contract (discounted wholesale price if paying early, financing rate if delaying payment) from the supplier's perspective. Under mild assumptions we conclude that a risk-neutral supplier should always finance the retailer at rates less than or equal to the risk-free rate. The retailer, if offered an optimally structured trade credit contract, will always prefer supplier financing to bank financing. Furthermore, under optimal trade credit contracts, both the supplier's profit and supply chain efficiency improve, and the retailer might improve his profits relative to under bank financing (or equivalently, a rich retailer under wholesale price contracts), depending on his current \"wealth\" (working capital and collateral).

We investigate whether the first digit of an odometer reading is more salient to consumers than subsequent digits. We find that retail transaction prices and volumes of used vehicles drop discontinuously at 10,000-mile odometer thresholds, echoing effects found in the wholesale market by Lacetera, Pope and Sydnor (2012). Our results reveal that retail consumers devote limited attention to evaluating vehicle mileage, and that this drives effects in the wholesale market. We estimate the inattention parameter implied by the price discontinuities. In addition, our results suggest that estimating consumer-level structural parameters using data from an intermediate market can give misleading results.

Small suppliers often face challenges to obtain financing for their operations. Especially in developing economies, traditional financing methods can be very costly or unavailable to such suppliers. To reduce channel costs, large buyers have recently begun implementing their own financing methods that intermediate between suppliers and financing institutions. In this paper, we analyze the role and efficiency of buyer intermediation in supplier financing. Building a game-theoretical model, we show that buyer intermediated financing can significantly improve channel performance, and can simultaneously benefit both supply chain participants. Using data from a large Chinese online retailer and through structural regression estimation, we demonstrate that buyer intermediation lowers interest rates and wholesale prices, increases order fill rates, and boosts supplier borrowing. Based on counterfactual analysis on the data, we predict that the implementation of buyer intermediated financing will improve channel profits by 13.05%, increasing supplier and retailer profits by more than 10% each, and yielding approximately $44 million projected savings for the retailer. The online supplement is available at https://doi.org/10.1287/mnsc.2017.2863 . This paper was accepted by Vishal Gaur, operations management.