Trust Based Capacity Decision In Supply Chains

This paper investigates capacity decision of manufacturer in information sharing.When multiple retailers compete for capacity,retailers report their private forecast information about market demand to the manufacturer via “cheap talk”,and then manufacturer makes his capacity decision based on that information.This paper introduces both constant factors and instant factors of trust to develop trust-based forecast information sharing models with multiple retailers.This paper analyzes how trust works in forecast information sharing with multiple retailers,and the relationships between optimal capacity decision and trust level,retailers' report information and unit capacity cost.The study illustrates optimal capacity decision of manufacturer are strictly increasing in retailers' reports and trust factors respectively,and is strictly decreasing in unit capacity cost.Meanwhile,when retailers' disutility of deception is large enough,retailers will report credible forecast information.This paper also quantifies the models by simulation,which shows the effectiveness of the models.This paper determines the positive impact of trust on capacity decision in forecast information sharing with multiple retailers,which provides the implications for improving effectiveness of information sharing in supply chain.