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Sustainability 2017, 9(6), 964; doi:10.3390/su9060964

Sustainable Regulation of Information Sharing with Electronic Data Interchange by a Trust-Embedded Contract

1
School of International and Public Affairs, Shanghai Jiao Tong University, Shanghai 200030, China
2
Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai 200030, China
*
Author to whom correspondence should be addressed.
Academic Editor: Marc Rosen
Received: 23 April 2017 / Revised: 15 May 2017 / Accepted: 31 May 2017 / Published: 6 June 2017
(This article belongs to the Section Economic, Business and Management Aspects of Sustainability)
View Full-Text   |   Download PDF [2335 KB, uploaded 6 June 2017]   |  

Abstract

This paper studies the risks in demand information sharing applications by electronic soft-orders using electronic data interchange (EDI) systems in e-commerce and aims to suggest a sustainable regulation mechanism with a trust-embedded contract. In a supply chain with one retailer and one supplier, the retailer solicits private forecasted demand and places soft-orders via EDI to the supplier. To ensure abundant supply, the retailer has an incentive to inflate her soft-orders, which potentially harms the credible information sharing and sustainability of business cooperation. Normally, the degree to which the supplier relies on the retailer’s order information is specified by trust, which is evaluated according to the retailer’s reputation and supplier’s intuition in this study. Based on standard game theory, we find that both the retailer’s order and the quantity of supplier prepared materials are independent of the retailer’s forecast. Therefore, EDI based information sharing in e-commerce without a regulation mechanism leads to inefficient demand information sharing. Since both the supplier and retailer are proved to faces huge of potential profit losses due to the failure of information sharing, the commerce by EDI based information sharing is full of risk and unsustainable. Therefore, a regulation mechanism that leaded by the retailer is proposed to establish ‘win-win’ sustainable cooperation. Numerical experiments highlight the value of trust, the impact of reputation and intuition in decisions, and the effectiveness of the regulation mechanism by a cost-sharing contract. View Full-Text
Keywords: electronic soft-order; information sharing; trust; regulation electronic soft-order; information sharing; trust; regulation
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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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Han, G.; Dong, M. Sustainable Regulation of Information Sharing with Electronic Data Interchange by a Trust-Embedded Contract. Sustainability 2017, 9, 964.

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