Choosing to Know Less: Strategic Ignorance as a Commitment Device in Vertical Markets with Demand Shocks

This paper examines how a retailer's strategic decision to remain uninformed about market demand can influence outcomes in vertical markets. Rather than treating information acquisition as a straightforward cost‐benefit calculation, we show that staying deliberately ignorant may serve as a strategic commitment device that softens upstream pricing and deters inefficient direct market entry. In a setting where a manufacturer can choose to open a direct sales channel, we find that the retailer's information strategy – whether to acquire demand information, remain uninformed, or share acquired information – can substantially impact the channel structure, wholesale pricing, and total supply chain profit. Notably, the retailer's optimal information acquisition decision is non‐monotonic in the expected market potential. Strategic ignorance can deter inefficient manufacturers from entering the market, while information sharing may serve as an anti‐competitive device when demand is sufficiently high. These findings illustrate how strategic choices regarding information acquisition can alter market structures and create new opportunities for supply chain coordination.