Competition intensity uncertainty and information leakage incentive in supply chain

This paper addresses the complexities of supply chain management amidst uncertain market competition, a frontier issue driven by the rapid evolution of modern markets. We analyze a supply chain consisting of one supplier and two competing retailers, operating under asymmetric information regarding market competition intensity. Our study primarily investigates the incentives for information leakage by informed supply chain members, considering both the wholesale price contract (WPC) and the quantity discount contract (QDC). Utilizing signaling game theory, we uncover a prevalent tendency for information leakage under WPC, with the separating equilibrium emerging as the dominant scenario. Conversely, our findings under QDC suggest a potential for non-leakage equilibrium, particularly in highly competitive markets with suitable quantity discounts. This indicates QDC’s effectiveness in mitigating information leakage and enhancing supply chain sustainability in volatile competitive environments. Our research highlights the critical importance of strategic contract selection in managing information risks and fostering sustainable supply chain systems.