Abstract
We apply a fairness approach to study the use of total cost of ownership (TCO) versus traditional purchasing (TP) information in buyer-supplier contract negotiations under different supply chain problems. We report the results of a 2 by 3 between subjects design in which we manipulate the buyer's type of purchasing information (TCO vs. TP) and the type of supply chain problem (external problem, buyer problem or supplier problem). Under TP information, the buyer's profit is higher with an external problem than with problems caused by either the supplier or the buyer. TCO information allows the buyer to improve its profits when the buyer is the cause of the problem. However, in case of a supplier problem, TCO has no value over TP information: the supplier perceives the buyer's use of TCO information to persuade the supplier to adopt other contract solutions as unfair. In addition, this reaction decreases the interfirm cooperation and joint profit.
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