Productivity information in vertical sharing agreements

That firms share information with their rivals is both well-known and studied. However, firms also often share information with their suppliers. The firm's incentive to share productivity information with both its supplier and its rival is examined. It is found that by sharing productivity information a firm raises its own expected input price, which raises the rival's expected input price. In contrast, sharing cost or demand information does not have this effect. Through this price effect information sharing can increase expected producer surplus in price competition, while in previous work the sharing of cost information always reduced producer surplus. (c) 2006 Elsevier B.V. All rights reserved.