Information Sharing , Advice Provision or Delegation : What Leads to Higher Trust in a Distribution Channel ?

Retailers often solicit assistance from manufacturers in the form of information report about market conditions or advice about retail decisions, or even by requesting manufacturers to make decisions on their behalf. Often such assistance is not governed by formal contracts, causing concerns about manufacturer opportunism. We investigate whether and how the form of manufacturer assistance information sharing, advice provision or delegation a ects retailer trust and coordination of channel decisions. Standard theory predicts equivalent outcomes complete lack of trust and coordination under all three arrangements. However, in laboratory experiments, we nd that some arrangements lead to higher trust and coordination than others. We propose that the three forms of manufacturer assistance produce di erent outcomes due to the di erences in manufacturer's decision domain (information vs. action domain) and decision sequence (whether retailer or manufacturer decides rst). We also nd that, despite the presence of manufacturer opportunism, retailers that are trusting make higher pro ts than retailers lacking in trust. In contrast, trustworthy manufacturers do not fare well. Our results o er some insights into how to e ectively manage distribution channels and why some channel arrangements lead to more successful outcomes than others.∗