Impact of Fairness Concern on Retailer-Dominated Supply Chain

Abstract

On the basis of a two-echelon supply chain model, this study researches the impact of fairness concern on a supply chain with a dominant retailer and two manufacturers. Through mathematical analysis and numerical study, this work examines the effects of fairness concern coefficient on pricing, profitability, and utility of the supply chain members. Results show that when only the dominant retailer has fairness concerns, the utility of that retailer increases, while the retailer's profit declines slightly, and the profits of manufacturers decrease with the fairness concern coefficient of the retailer. In the case only the manufacturers have fairness concerns, when the manufacturers has more fairness concerns, then the utility of the manufacturer with the cost advantage increases and that of the manufacturer in the disadvantaged position decreases. The retailer benefits substantially with the fairness concerns of the manufacturers. In the case each member of the supply chain has fairness concerns, if members have additional fairness concerns, the profit of the dominant retailer will slightly decrease, whereas utility will increase. However, the profit and utility of the cost-disadvantaged manufacturer may significantly be reduced.