The Decision Strategy of Extended Warranty Service for Supply Chain with the Consideration of Vertical Fairness Concern

Abstract

While the extended warranty services bring profits to the supply chain, they also have adverse unfair aversions in the game process of retailers or manufacturers, and affect supply chain stability and performance. With the consideration of vertical fairness concerns, a supply chain decision model that provides extended warranty services by manufacturers or retailers and considers the other party's fairness concerns is established, which is used to analyze the relationship between the vertical fairness concerns and supply chain performance (supply chain profit and supply chain equity concerns). Simulation experiments show that: under the two situations, manufacturers provide extended warranty services and consider retailers' fairness concerns and retailers provide extended warranty services and consider manufacturers' fairness concerns, the vertical fairness concern coefficient has an important impact on the decision of product wholesale price, retail price, and extension services price, as well as supply chain profit and supply chain fairness concern utility; in turn, supply chain companies can develop corresponding extended service strategies based on supply chain profit and supply chain performance optimization, and make a vertical equity concern strategy for providing extended warranty services based on expected supply chain profit or supply chain performance.