Supply chain information sharing in a macro prediction market

Supply chain information sharing in a macro prediction market

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Article ID: iaor2008737
Country: Netherlands
Volume: 42
Issue: 3
Start Page Number: 1944
End Page Number: 1958
Publication Date: Dec 2006
Journal: Decision Support Systems
Authors: , ,
Keywords: marketing, artificial intelligence: decision support
Abstract:

This paper aims to address supply chain partners' incentives for information sharing from an information systems design perspective. Specifically, we consider a supply chain characterized by N geographically distributed retailers who order a homogeneous product from one manufacturer. Each retailer's demand risk consists of two parts: a systematic risk part that affects all retailers and an idiosyncratic risk part that only has a local effect. We propose a macro prediction market to effectively elicit and aggregate useful information about systematic demand risk. We show that such information can be used to achieve accurate demand forecast sharing and better channel coordination in the supply chain system. Our market-based framework extends the range of information sharing beyond the supply chain system. It also opens the door for other corporate risk management opportunities to hedge against aggregate economic risk.

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