Abstract: In supply chains, it is increasingly popular that many companies start to share information with each other in order to gain competitive advantage. It is commonly observed that a significant amount of information is being exchanged between suppliers and manufacturers, between manufacturers and retailers, between retailers and consumers, and also among competitors to improve collaborations. Most supply chains literatures study vertical information in the absence of horizontal information sharing. Some papers investigate horizontal information sharing among competitors in a one-level market, in which interactions between vertical parties is not considered. Therefore, the present study focuses on the effect of horizontal information sharing across buyers on the supplier and how the supplier can affect downstream information sharing strategy using wholesale pricing in the absence of vertical information sharing. In this paper, the effect of bound equilibria of manufacturers on supplier's pricing and horizontal information sharing strategy is investigated by using a two-echelon supply chain comprising one upstream supplier and two downstream manufacturers. In this model, the supplier offers same wholesale price to both manufacturers, and the two manufacturers produce substitutable final products and engage in quantity competition with capacity constraints. By constructing a Cournot competition model, equilibrium order quantity and information sharing strategy for manufacturers are solved and the profit of the manufacturers and the supplier and the wholesale price under different information sharing strategies are analyzed and compared. In numerical study, an algorithm is developed to derive supplier's optimal wholesale price and the effect of capacity constraints on information sharing strategy and profit of supplier and manufacturers is studied by using a Matlab program. The results show that the incentives can be reversed when some equilibrium solutions are binding on capacity and we identify some conditions under which full information sharing or no information sharing is the dominant strategy. Upstream supplier can influence the manufacturer's information sharing strategies by adjusting the wholesale price. Manufacturers' ordering decisions and an algorithm for supplier's optimal pricing decisions under different situations are established in this study.

Key words: supply chain management, capacity constraints, information sharing, nash equilibrium