Abstract: The study considers a three-level supply chain consisting of a manufacturer, a large and a small retailer, and a customer, where the manufacturer infers the market demand state from the large retailer's orders and decides whether to invade channel and leak information, and constructs four game models between the manufacturer and the retailer to investigate the manufacturer's optimal strategy choice and the impact on the profit of the supply chain members. It is found that whether a manufacturer invades or not is related to the size of sales cost and the state of product market demand; whether a manufacturer leaks information is related to whether it invades through direct sales channels and the high prior market probability; the average value of large retailer orders affects the manufacturer's decision to leak information; and a manufacturer's information leak is not always beneficial to the small retailer.

Key words: information leakage, channel encroachment, the manufacturer's strategy