Fairness and retailer-led supply chain coordination under two different degrees of trust

Huimin Liu; Hui Yu

doi:10.3934/jimo.2016076

Article Contents

2017, Volume 13, Issue 3: 1347-1364. Doi: 10.3934/jimo.2016076

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Fairness and retailer-led supply chain coordination under two different degrees of trust

Huimin Liu^1, and
Hui Yu^2, ,

1.
Applied Economics Postdoctoral Research Station, Business School, Guangxi University, Nanning, Guangxi, 530004, China
2.
School of Economics and Business Administration, Chongqing University, Chongqing 400030, China

* Corresponding author
* Corresponding author

Received: August 31, 2014

Revised: July 31, 2016

Published: September 2017

The authors are partially supported by NSF grant 71571024 and the humanities and social sciences research program of the Ministry of Education (15YJA630058, 14YJA630087). The first author is partially supported by Guangxi Postdoctoral Special Funding Project.

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Abstract

Nowadays, customers are the decisive part in the market. The retailers who are closest to final consumers in a supply chain begin to show their power and thereby dominate the supply chain. Thus, the research about a retailer-led supply chain continues to be a burning question in the recent trade press and academic literature. Our research adds fresh fuel to the fire by studying how one channel member' fairness concern affects the coordination of a two-stage supply chain with a dominant retailer and a supplier. We carry out our investigation in two cases which involve different degrees of trust between the channel members about the unit cost $c$ provided by the supplier. Our analysis shows that if the channel members have the same degree of trust on $c$-value, the dominant retailer can use a constant markup pricing contract to align the fair-minded supplier's interest with the channel's and coordinate the channel with a wholesale price higher than the supplier's marginal cost; but the coordination fails if the dominant retailer is the only one who cares about fairness, and he obtains a lower profit than nobody cares about fairness. If the dominant retailer and the supplier have different degrees of trust on $c$-value, the retailer can not coordinate the channel with a markup pricing contract when only the supplier has fairness concerns.

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Mathematics Subject Classification: Primary: 90B06; Secondary: 91A10.

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Figure 1. The effect of $\gamma_s$ on prices

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Figure 2. The effect of $\gamma_s$ on profit(utility)

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Figure 3. The effect of $\alpha_s$ on prices

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Figure 4. The effect of $\alpha_s$ on profit(utility)

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Figure 5. The effect of $\beta_s$ on prices

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Figure 6. The effect of $\beta_s$ on profit(utility)

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Figure 7. The effect of $\gamma_r$ on prices

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Figure 8. The effect of $\gamma_r$ on profit(utility)

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Figure 9. The effect of $\alpha_r$ on prices

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Figure 10. The effect of $\alpha_r$ on profit(utility)

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Figure 11. The effect of $\beta_r$ on prices

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Figure 12. The effect of $\beta_r$ on profit(utility)

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Figure 13. The effect of $\mu$ on prices

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Figure 14. The effect of $\mu$ on profit(utility)

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