Abstract: In order to study information sharing between longitudinal members and horizontal members′ demand information leakage mechanism in a supply chain, a basic model consisting of one wholesaler and two competing retailers (incumbent and entrant) is established. The selling products are alternative and subject to Bertrand competition. The differential pricing strategies of the two retailers are discussed under the conditions of information confidentiality and information leakage. The supplier′s choice mechanism is analyzed. The results are as follows: Once the leakage occurs, the retailers will choose the separating equilibrium price. The entrant can judge that the market is high when the incumbent′s price is higher than separating equilibrium price, and otherwise low in market demand. When the product pricing of the incumbent is at the minimum interval, the wholesaler will disclose the incumbent′s pricing information.

Key words:  screening, Bertrand competition, differential pricing, information leakage, supply chain