Channels Coordination Game Model Based on Result Fairness Preference and Reciprocal Fairness Preference: A Behavior Game Forecasting and Analysis Method

Kaihong Wang,Chuan Ding,Xiaoying Huang

doi:10.1155/2014/321958

Kaihong Wang, Chuan Ding + Show 1 more

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https://doi.org/10.1155/2014/321958

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Abstract

In a distribution channel, channel members are not always self-interested, but altruistic in some conditions. Based on this assumption, this paper adopts a behavior game method to analyze and forecast channel members’ decision behavior based on result fairness preference and reciprocal fairness preference by embedding a fair preference theory in channel research of coordination. The behavior game forecasts that a channel can achieve coordination if channel members consider behavior elements. Using the behavior game theory model we established, we can prove that if retailers only consider the result fairness preference and they are not jealous of manufacturers’ benefit, manufacturers will be more friendly to retailers. In such case, the total utility of the channel is higher compared with that of self-interest channel, and the utility of channel members is Pareto improved. If both manufactures and retailers consider reciprocal fairness preference, the manufacturers will give a lower wholesale price to the retailers. In return, the retailers will also reduce retail prices. Therefore, the total utility of the channels will not be less than the total utility of the channel coordination, as long as the reciprocity wholesale prices meet certain conditions.

Highlights

Under the four models we mentioned before, simple model of channel coordination, manufacturer leading channel pricing model, channel pricing model based on result fairness preference, and channel pricing model based on reciprocity fairness preference, we should consider the following
In three cases, the wholesale price that the manufacturer gives the retailer satisfies the following relations: (1) when (a − c)αη/2(1 + α + αη) ≤ w0, it holds that wF∗ ≤ wF∗ ≤ w∗; (2) when (a − c)αη/2(1 + α + αη) ≥ w0, it holds that wF∗ ≤ wF∗ ≤ w∗
In four cases, the optimal retail price satisfies the following relations: (1) when w0 ≤ (a − c)/2, it holds that pC∗ ≤ pF∗ ≤ pF∗ = p∗; (2) when w0 ≥ (a − c)/2, it holds that pF∗ ≤ pC∗ ≤ pF∗ = p∗

Summary

Introduction

There was a conflict between GREE and GOME in 2004. The lack of coordination led to damage in profits of both sides. GOME and GREE found that conflicts in the past few years resulted in a detriment to their profits. They shook hands in 2007 [1]. Aamoco’s franchisees eagerly required to decrease the rate of royalty from 9% to 5% and, in the meantime, expand their business area. The conflict led to decreasing profits on both sides

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