Value of information in a mobile app supply chain under hidden or known information superiority

Tal Avinadav, Priel Levy

Research output: Contribution to journalArticlepeer-review

10 Scopus citations

Abstract

We introduce a game-theoretic analysis of a supply chain in the mobile app industry consisting of a distribution platform and an app developer. The app's demand is uncertain and estimated by the same distribution function for both parties. The platform can substantially reduce the uncertainty associated with the base demand using accumulated data of similar apps distributed via its portal, and decide whether to disclose this information to the developer. Two scenarios are investigated: hidden superiority, where the information status of the platform is non-transparent; and known superiority, where it is transparent. We show that: (a) under hidden superiority: (i) the platform should disclose its private information only when demand forecast is pessimistic; (ii) the platform always benefits from knowing the exact value of the base demand, while the developer may either lose or benefit from the platform's knowledge; (b) under known superiority: (i) the developer gains valuable knowledge about the base demand using a Bayesian update, so the platform always has to disclose its private information; (ii) both parties benefit from the platform's knowledge. While it is clear that for the platform hidden superiority is always better than known superiority, we find that counter-intuitively, for the developer, hidden superiority may be preferable over known superiority. Furthermore, for each scenario, we investigate the value of information and the effect of demand volatility. We further examine the effect of the identity of the more informed party on the supply-chain measures and parties' profits at equilibrium.

Original languageEnglish
Article number108467
JournalInternational Journal of Production Economics
Volume248
DOIs
StatePublished - Jun 2022

Bibliographical note

Publisher Copyright:
© 2022 Elsevier B.V.

Funding

This research was supported by the Israel Science Foundation (grant No. 1571/20 ). The authors would like to thank Isaac Meilijson for his help in proving Lemma 2 and the two anonymous reviewers for their constructive comments and suggestions which have significantly improved the paper.

FundersFunder number
Israel Science Foundation1571/20

    Keywords

    • Information superiority
    • Mobile apps
    • Revenue sharing contract
    • Supply chain management

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