Who exhibits fairness concern is better for supply chain stability and the environment

Abstract

In practice, long-term unfair distribution of profit may cause cooperation partnerships between firms to break down. For example, Xuzhou Wanji Trading Co., as a distributor, terminated the business cooperation with Procter & Gamble. Thus, to maintain supply chain cooperation, firms no matter reap high profits or low profits begin to be concerned about fairness. Based on this, we explore how fairness attitudes affect operation and emission reduction decisions in a supply chain with one manufacturer and one retailer, especially under cap-and-trade (C&T) regulation. This paper develops three Stackelberg game models: no fairness concern, with retailer’s fairness concern, and with manufacturer’s altruistic preference, respectively, and then derive equilibrium outcomes to analyze the joint effect of fairness attitudes and C&T regulation. First, the results demonstrate that the retailer’s fairness concern increases his own profit while decreases the manufacturer’s optimal emission reduction and profit. Second, the manufacturer’s altruistic preference not only facilitates a more equitable distribution of overall profits but also results in lower emissions of unit product, achieving a win–win situation. Consequently, the manufacturer’s altruistic preference performs better than the retailer’s fairness concern in balancing fairness and emission reduction. Interestingly, if the manufacturer decides to reduce emissions, the total emissions are lower under a loose C&T regulation; otherwise, the total emissions are lower under a strict C&T regulation.