October  2013, 9(4): 967-982. doi: 10.3934/jimo.2013.9.967

Channel coordination mechanism with retailers having fairness preference ---An improved quantity discount mechanism

1. 

School of Economics and Mathematics, Southwestern University of Finance and Economics, 610074, Chengdu, China, China, China

Received  November 2012 Revised  June 2013 Published  August 2013

Channel coordination is an optimal state with operation of channel. For achieving channel coordination, we present a quantity discount mechanism based on a fairness preference theory. Game models of the channel discount mechanism are constructed based on the entirely rationality and self-interest. The study shows that as long as the degree of attention (parameters) of retailer to manufacturer's profit and the fairness preference coefficients (parameters) of retailers satisfy certain conditions, channel coordination can be achieved by setting a simple wholesale price and fixed costs. We also discuss the allocation method of channel coordination profit, the allocation method ensure that retailer's profit is equal to the profit of independent decision-making, and manufacturer's profit is raised.
Citation: Chuan Ding, Kaihong Wang, Shaoyong Lai. Channel coordination mechanism with retailers having fairness preference ---An improved quantity discount mechanism. Journal of Industrial and Management Optimization, 2013, 9 (4) : 967-982. doi: 10.3934/jimo.2013.9.967
References:
[1]

K. J. Arrow, Optimal and voluntary income redistribution, in "Economic welfare and the economics of soviet socialism: essays in Honor of Abram Bergson" (ed. Steven Rosenfield), Cambridge University Press, 1981.

[2]

G. E. Bolton, A comparative model of bargaining: theory and evidence, American Economic Review, 81 (1991), 1096-1106. doi: http://www.jstor.org/stable/2006908.

[3]

L. Caccetta and E. Mardaneh, Joint pricing and production planning for fixed priced multiple products with backorders, Journal of Industrial and Management Optimization, 6 (2010), 123-147. doi: 10.3934/jimo.2010.6.123.

[4]

G. Charness and M. Rabin, Understanding social preferences with simple tests, Quarterly Journal of Economics, 9 (2002), 151-172. doi: 10.1162/003355302760193904.

[5]

J. Chen, Analysis on buyers' cooperative strategy under group-buying price mechanism, Journal of Industrial and Management Optimization, 9 (2013), 291-304. doi: 10.3934/jimo.2013.9.291.

[6]

T. Coughlan, Competition and cooperation in marketing channel choice: theory and application, Marketing Science, 4 (1985), 110-129. doi: 10.1287/mksc.4.2.110.

[7]

T. H. Cui, J. S. Raju and Z. J. Zhang, Fairness and channel coordination, Management Science, 53 (2007), 1303-1314. doi: 10.1287/mnsc.1060.0697.

[8]

A. Debruyn and G. E. Bolton, Estimating the influence of fairness on bargaining behavior, Management Science, 54 (2008), 1774-1791. doi: 10.1287/mnsc.1080.0887.

[9]

S. F. Du, et. al, Supply chain coordination considering fairness concerns, Journal of Management Sciences in China, 13 (2010), 41-48. doi: 10.1504/IJSSS.2011.038931.

[10]

E. Fehr and K. Schmidt, A theory of fairness, competition and cooperation, Quarterly Journal of Economics, 114 (2002), 817-868. doi: 10.1162/003355399556151.

[11]

T. H. Ho and J. J Zhang, Designing pricing contracts for boundedly rational customers: Does the framing of the fixed fee Matter?, Management Science, 54 (2008), 686-700. doi: 10.1287/mnsc.1070.0788.

[12]

B. Holmstrom and P. Milgrom, Aggregation and linearity in the provision of intertemporal incentives, Econometrica, 55 (1987), 303-328. doi: 10.2307/1913238.

[13]

C. A. Ingene and M. E. Parry, Coordination and manufacturer profit maximization: The multiple retailer channel, Journal of Retailing, 71 (1995), 129-152. doi: 10.1016/0022-4359(95)90004-7.

[14]

C. A. Ingene and M. E. Parry, Channel coordination when retailers compete, Marketing Science, 14 (1995), 360-377. doi: 10.1287/mksc.14.4.360.

[15]

A. P. Jeuland and S. M. Shugan, Managing channel profits, Marketing Science, 27 (2008), 52-69. doi: 10.1287/mksc.1070.0342.

[16]

D. Kahneman, J. L. Knetsch and R. Thaler, Fairness and the assumptions of economics, The Journal of Business, Part 2: The Behavioral Foundations of Economic Theory, 59 (1986), 285-300. doi: 10.1086/296367.

[17]

E. Katok and V. Pavlov, Fairness in supply chain contracts: A laboratory study, 31 (2013), 137-145. doi: 10.1016/j.jom.2013.01.001.

[18]

C. H. Loch and Y. Z. Wu, Social preferences and supply chain performance: An experimental study, Management Science, 54 (2008), 1835-1849. doi: 10.1287/mnsc.1080.0910.

[19]

L. J. Ma, Supply chain analysis with fairness preference, Operations Research and Management Science, 20 (2011), 37-43. doi: 10.3969/j.issn.1007-3221.2011.02.006.

[20]

T. W. McGuire and R. Staelin, "Channel efficiency, incentive compatibility, transfer pricing and market structure: An equilibrium analysis of channel relationships, research in marketing," in "Research in Marketing: Distribution Channels and Institutions" (eds. L. P. Bucklin and J. M. Carman), Vol. 8, JAI Press, Greenwich, CT, 1986.

[21]

T. W. McGuire and R. Staelin, An industry equilibrium analyses of down stream vertical integration, Marketing Science, 27 (2008), 115-145. doi: 10.1287/mksc.1070.0335.

[22]

C. Ozgun, Y. H. Chen and J. B. Li, Channel coordination under fairness concerns and nonlinear demand, European Journal of Operational Research, 20 (2010), 1321-1326. doi: 10.1016/j.ejor.2010.07.017.

[23]

M. Rabin, Incorporating fairness into game theory and economics, American Economic Review, 83 (1993), 1281-1302. doi: 10.2307/2117561.

[24]

P. A. Samuelson, Altruism as a problem involving group versus individual selection in economics and biology, American Economic Review, 83 (2002), 143-148. doi: http://www.jstor.org/stable/2117655.

[25]

Sen Amartya, "Moral Codes and Economic Success," Market Capitalism and Moral Values, Elgar: Aldershot, 1995.

[26]

Z.-J. Shen, Integrated supply chain design models: A survey and future research directions, Journal of Industrial and Management Optimization, 3 (2007), 1-27. doi: 10.3934/jimo.2007.3.1.

[27]

J. Shu and J. Sun, Designing the distribution network for an integrated supply chain, Journal of Industrial and Management Optimization, 2 (2006), 339-349. doi: 10.3934/jimo.2006.2.339.

[28]

H. Wang, and W. H. Hou, Design of supply chain incentive contracts with fairness preference of the suppliers considered, Logistics Tech, 17 (2010), 44-48. doi: 10.3969/j.issn.1005-152X.2010.17.016.

[29]

J. Wu, et. al, Supply contract model with service level constraint, Journal of Industrial and Management Optimization, 1 (2005), 275-287. doi: 10.3934/jimo.2005.1.275.

[30]

W. Xing, et. al, Impact of fairness on strategies in dual-channel supply chain, Systems Engineering-Theory and Practice(in China), 31 (2011), 1250-1256.

[31]

J. L. Zhang, Coordination of supply chain with buyer's promotion, Journal of Industrial and Management Optimization, 3 (2007), 715-726. doi: 10.3934/jimo.2007.3.715.

[32]

J. L. Zhang and J. Chen, Externality of contracts on supply chains with two suppliers and a common retailer, Journal of Industrial and Management Optimization, 6 (2010), 795-810. doi: 10.3934/jimo.2010.6.795.

[33]

Y. T. Zhu, "Channel Conflict," (in China) Management Press, 2004.

[34]

H. X. Zhu, Household electrical industry channel conflict and its resolution- Analysis based on the Green Electric, (in China) Jiangsu Commercial Forum, 7 (2010), 14-16.

show all references

References:
[1]

K. J. Arrow, Optimal and voluntary income redistribution, in "Economic welfare and the economics of soviet socialism: essays in Honor of Abram Bergson" (ed. Steven Rosenfield), Cambridge University Press, 1981.

[2]

G. E. Bolton, A comparative model of bargaining: theory and evidence, American Economic Review, 81 (1991), 1096-1106. doi: http://www.jstor.org/stable/2006908.

[3]

L. Caccetta and E. Mardaneh, Joint pricing and production planning for fixed priced multiple products with backorders, Journal of Industrial and Management Optimization, 6 (2010), 123-147. doi: 10.3934/jimo.2010.6.123.

[4]

G. Charness and M. Rabin, Understanding social preferences with simple tests, Quarterly Journal of Economics, 9 (2002), 151-172. doi: 10.1162/003355302760193904.

[5]

J. Chen, Analysis on buyers' cooperative strategy under group-buying price mechanism, Journal of Industrial and Management Optimization, 9 (2013), 291-304. doi: 10.3934/jimo.2013.9.291.

[6]

T. Coughlan, Competition and cooperation in marketing channel choice: theory and application, Marketing Science, 4 (1985), 110-129. doi: 10.1287/mksc.4.2.110.

[7]

T. H. Cui, J. S. Raju and Z. J. Zhang, Fairness and channel coordination, Management Science, 53 (2007), 1303-1314. doi: 10.1287/mnsc.1060.0697.

[8]

A. Debruyn and G. E. Bolton, Estimating the influence of fairness on bargaining behavior, Management Science, 54 (2008), 1774-1791. doi: 10.1287/mnsc.1080.0887.

[9]

S. F. Du, et. al, Supply chain coordination considering fairness concerns, Journal of Management Sciences in China, 13 (2010), 41-48. doi: 10.1504/IJSSS.2011.038931.

[10]

E. Fehr and K. Schmidt, A theory of fairness, competition and cooperation, Quarterly Journal of Economics, 114 (2002), 817-868. doi: 10.1162/003355399556151.

[11]

T. H. Ho and J. J Zhang, Designing pricing contracts for boundedly rational customers: Does the framing of the fixed fee Matter?, Management Science, 54 (2008), 686-700. doi: 10.1287/mnsc.1070.0788.

[12]

B. Holmstrom and P. Milgrom, Aggregation and linearity in the provision of intertemporal incentives, Econometrica, 55 (1987), 303-328. doi: 10.2307/1913238.

[13]

C. A. Ingene and M. E. Parry, Coordination and manufacturer profit maximization: The multiple retailer channel, Journal of Retailing, 71 (1995), 129-152. doi: 10.1016/0022-4359(95)90004-7.

[14]

C. A. Ingene and M. E. Parry, Channel coordination when retailers compete, Marketing Science, 14 (1995), 360-377. doi: 10.1287/mksc.14.4.360.

[15]

A. P. Jeuland and S. M. Shugan, Managing channel profits, Marketing Science, 27 (2008), 52-69. doi: 10.1287/mksc.1070.0342.

[16]

D. Kahneman, J. L. Knetsch and R. Thaler, Fairness and the assumptions of economics, The Journal of Business, Part 2: The Behavioral Foundations of Economic Theory, 59 (1986), 285-300. doi: 10.1086/296367.

[17]

E. Katok and V. Pavlov, Fairness in supply chain contracts: A laboratory study, 31 (2013), 137-145. doi: 10.1016/j.jom.2013.01.001.

[18]

C. H. Loch and Y. Z. Wu, Social preferences and supply chain performance: An experimental study, Management Science, 54 (2008), 1835-1849. doi: 10.1287/mnsc.1080.0910.

[19]

L. J. Ma, Supply chain analysis with fairness preference, Operations Research and Management Science, 20 (2011), 37-43. doi: 10.3969/j.issn.1007-3221.2011.02.006.

[20]

T. W. McGuire and R. Staelin, "Channel efficiency, incentive compatibility, transfer pricing and market structure: An equilibrium analysis of channel relationships, research in marketing," in "Research in Marketing: Distribution Channels and Institutions" (eds. L. P. Bucklin and J. M. Carman), Vol. 8, JAI Press, Greenwich, CT, 1986.

[21]

T. W. McGuire and R. Staelin, An industry equilibrium analyses of down stream vertical integration, Marketing Science, 27 (2008), 115-145. doi: 10.1287/mksc.1070.0335.

[22]

C. Ozgun, Y. H. Chen and J. B. Li, Channel coordination under fairness concerns and nonlinear demand, European Journal of Operational Research, 20 (2010), 1321-1326. doi: 10.1016/j.ejor.2010.07.017.

[23]

M. Rabin, Incorporating fairness into game theory and economics, American Economic Review, 83 (1993), 1281-1302. doi: 10.2307/2117561.

[24]

P. A. Samuelson, Altruism as a problem involving group versus individual selection in economics and biology, American Economic Review, 83 (2002), 143-148. doi: http://www.jstor.org/stable/2117655.

[25]

Sen Amartya, "Moral Codes and Economic Success," Market Capitalism and Moral Values, Elgar: Aldershot, 1995.

[26]

Z.-J. Shen, Integrated supply chain design models: A survey and future research directions, Journal of Industrial and Management Optimization, 3 (2007), 1-27. doi: 10.3934/jimo.2007.3.1.

[27]

J. Shu and J. Sun, Designing the distribution network for an integrated supply chain, Journal of Industrial and Management Optimization, 2 (2006), 339-349. doi: 10.3934/jimo.2006.2.339.

[28]

H. Wang, and W. H. Hou, Design of supply chain incentive contracts with fairness preference of the suppliers considered, Logistics Tech, 17 (2010), 44-48. doi: 10.3969/j.issn.1005-152X.2010.17.016.

[29]

J. Wu, et. al, Supply contract model with service level constraint, Journal of Industrial and Management Optimization, 1 (2005), 275-287. doi: 10.3934/jimo.2005.1.275.

[30]

W. Xing, et. al, Impact of fairness on strategies in dual-channel supply chain, Systems Engineering-Theory and Practice(in China), 31 (2011), 1250-1256.

[31]

J. L. Zhang, Coordination of supply chain with buyer's promotion, Journal of Industrial and Management Optimization, 3 (2007), 715-726. doi: 10.3934/jimo.2007.3.715.

[32]

J. L. Zhang and J. Chen, Externality of contracts on supply chains with two suppliers and a common retailer, Journal of Industrial and Management Optimization, 6 (2010), 795-810. doi: 10.3934/jimo.2010.6.795.

[33]

Y. T. Zhu, "Channel Conflict," (in China) Management Press, 2004.

[34]

H. X. Zhu, Household electrical industry channel conflict and its resolution- Analysis based on the Green Electric, (in China) Jiangsu Commercial Forum, 7 (2010), 14-16.

[1]

Tien-Yu Lin, Bhaba R. Sarker, Chien-Jui Lin. An optimal setup cost reduction and lot size for economic production quantity model with imperfect quality and quantity discounts. Journal of Industrial and Management Optimization, 2021, 17 (1) : 467-484. doi: 10.3934/jimo.2020043

[2]

Tien-Yu Lin, Ming-Te Chen, Kuo-Lung Hou. An inventory model for items with imperfect quality and quantity discounts under adjusted screening rate and earned interest. Journal of Industrial and Management Optimization, 2016, 12 (4) : 1333-1347. doi: 10.3934/jimo.2016.12.1333

[3]

Tien-Yu Lin. Effect of warranty and quantity discounts on a deteriorating production system with a Markovian production process and allowable shortages. Journal of Industrial and Management Optimization, 2021, 17 (3) : 1101-1118. doi: 10.3934/jimo.2020013

[4]

Xue Yan, Heap-Yih Chong, Jing Zhou, Zhaohan Sheng, Feng Xu. Fairness preference based decision-making model for concession period in PPP projects. Journal of Industrial and Management Optimization, 2020, 16 (1) : 11-23. doi: 10.3934/jimo.2018137

[5]

Jian Liu, Xin Wu, Jiang-Ling Lei. The combined impacts of consumer green preference and fairness concern on the decision of three-party supply chain. Journal of Industrial and Management Optimization, 2022, 18 (4) : 2749-2782. doi: 10.3934/jimo.2021090

[6]

Cheng Ma, Y. C. E. Lee, Chi Kin Chan, Yan Wei. Auction and contracting mechanisms for channel coordination with consideration of participants' risk attitudes. Journal of Industrial and Management Optimization, 2017, 13 (2) : 775-801. doi: 10.3934/jimo.2016046

[7]

Chong Zhang, Yaxian Wang, Ying Liu, Haiyan Wang. Coordination contracts for a dual-channel supply chain under capital constraints. Journal of Industrial and Management Optimization, 2021, 17 (3) : 1485-1504. doi: 10.3934/jimo.2020031

[8]

Wei Chen, Fuying Jing, Li Zhong. Coordination strategy for a dual-channel electricity supply chain with sustainability. Journal of Industrial and Management Optimization, 2021  doi: 10.3934/jimo.2021139

[9]

Shuhua Chang, Yameng Wang, Xinyu Wang, Kok Lay Teo. Pricing and energy efficiency decisions by manufacturer under channel coordination. Journal of Industrial and Management Optimization, 2022, 18 (3) : 1557-1582. doi: 10.3934/jimo.2021033

[10]

Wei Chen, Kaiming Zheng, Mengwen Li, Jianchang Fan, Nana Wan, Matthew Quayson. Dual-channel supply chain coordination strategies considering electricity quality. Journal of Industrial and Management Optimization, 2022  doi: 10.3934/jimo.2022148

[11]

Huimin Liu, Hui Yu. Fairness and retailer-led supply chain coordination under two different degrees of trust. Journal of Industrial and Management Optimization, 2017, 13 (3) : 1347-1364. doi: 10.3934/jimo.2016076

[12]

Ziyuan Zhang, Liying Yu. Joint emission reduction dynamic optimization and coordination in the supply chain considering fairness concern and reference low-carbon effect. Journal of Industrial and Management Optimization, 2021  doi: 10.3934/jimo.2021155

[13]

Jianxin Chen, Lin Sun, Tonghua Zhang, Rui Hou. Low carbon joint strategy and coordination for a dyadic supply chain with Nash bargaining fairness. Journal of Industrial and Management Optimization, 2022  doi: 10.3934/jimo.2021229

[14]

Xuemei Zhang, Chenhao Ma, Jiawei Hu, Wei Shi. Optimal distribution strategy and online channel mode by considering retailer's fairness concerns. Journal of Industrial and Management Optimization, 2022  doi: 10.3934/jimo.2022069

[15]

Chao Zhao, Jixiang Song. Coordination of dual-channel supply chain considering differential pricing and loss-aversion based on quality control. Journal of Industrial and Management Optimization, 2022  doi: 10.3934/jimo.2022053

[16]

Caichun Chai, Tiaojun Xiao, Eilin Francis. Is social responsibility for firms competing on quantity evolutionary stable?. Journal of Industrial and Management Optimization, 2018, 14 (1) : 325-347. doi: 10.3934/jimo.2017049

[17]

Shouyu Ma, Zied Jemai, Evren Sahin, Yves Dallery. Analysis of the Newsboy Problem subject to price dependent demand and multiple discounts. Journal of Industrial and Management Optimization, 2018, 14 (3) : 931-951. doi: 10.3934/jimo.2017083

[18]

Chun-Xiang Guo, Guo Qiang, Jin Mao-Zhu, Zhihan Lv. Dynamic systems based on preference graph and distance. Discrete and Continuous Dynamical Systems - S, 2015, 8 (6) : 1139-1154. doi: 10.3934/dcdss.2015.8.1139

[19]

Zhuchun Li. Effectual leadership in flocks with hierarchy and individual preference. Discrete and Continuous Dynamical Systems, 2014, 34 (9) : 3683-3702. doi: 10.3934/dcds.2014.34.3683

[20]

Tone Arnold, Myrna Wooders. Dynamic club formation with coordination. Journal of Dynamics and Games, 2015, 2 (3&4) : 341-361. doi: 10.3934/jdg.2015010

2021 Impact Factor: 1.411

Metrics

  • PDF downloads (254)
  • HTML views (0)
  • Cited by (11)

Other articles
by authors

[Back to Top]