Capacity Allocation In Supply Chain Under Fairness Concern

In the Internet era, information dissemination is with rapid speed and wide range. Furthermore, customers face a variety of choices. More rapid changes have been taken in the markets, which greatly increases the uncertainty of supply chain demand. In particular, when star products appear, it is likely to occur the shortage of them in the short term. such as electronic products etc. Normally in the short time, the capacity is limited and the price is stable. It’s very meaningful to research on the supplier’s choose of capacity allocation mechanism, which maximize the supplier’s profit. And it makes good sense to learn how to optimize allocation and boost the supply chain cooperation.Traditional supply chain research embraced the hypothesis, which means decision members are perfectly rational. However, a large number of empirical studies show that the members are limited rational. In recent years, more and more scholars discuss members’ limited rational behavior, such as fairness concern, loss aversion and risk preferences, which affects their decisions. On the basis of existing research, this paper introduces retailers’ fairness concern into supply chain with capacity constraint. Next, optimizing models have been built to analyze the affection of fairness, including Nash fairness, profit fairness, efficiency fairness and the fairness in the degree of out of stock. In addition, This article assumes that the supply chain is composed of one supplier and two retailers. Retailers are belong to different independent markets, which have different market share Then the research is roughly divided into below three parts:In the first part, under fairness neutral, different capacity allocation mechanism are compared, as is shown in the second chapter in this paper. Proportional allocation, lexicographic allocation and the turn-and-earn allocation are respectively considered, and supply chain members only pursuit the maximization in the profit. Specifically, based on the newsboy model, the order quantity, wholesale price and members’ profit have been compared under different kinds of allocation mechanisms. The results show that turn-and-earn performs better, which invites high efficiency in supply chain.The second part, supply chain operation with fairness concern is investigated, as is shown in the third chapter in this paper. Retailers’ utility function includes profit and fairness utility. Nash bargaining, efficiency fairness and profit fairness are respectively introduced to the members’decision-making. Simultaneously, mathematical models have been built, and members seek to maximize their utility. Then the influence of different fairness framework on supply chain efficiency is been analyzed. Retailer’s fairness concern change the decision of supply chain members in a similar way. In addition, different retailers’ fairness concern invite different agree of affection on whole supply chain according to their ability.In the third part, the retailer’s fairness concern and the turn-and-earn allocation are combined, as is listed in the fourth chapter. Under the background of limit capacity, reconsider the influence on the supply chain of the three different fairness concern, which are mentioned in the former part. In addition, the optimization model is established to study the effect of retailers’fairness related to the shortage degree. Different fairness frameworks mean different effects on the supply chain. Furthermore, for the same fairness reference, fairness concerns influence on profit of supply chain with or without limited capacity may be different. Especially, fairness concern can’t convert the fact that the wholesale price contract fail to coordinate the supply chain.In this paper, on the basis of the traditional research, retailers’ fairness concern has been introduced to the supply chain with limited capacity. The study enriches the exploration about fairness concern, And providing suggestions to suppliers for the capacity allocation mechanism, which can be attached theoretical and practical significance.