Fairness In The Supply Chain With The Dominant Retailer

In the past two decades, with the tremendous changes in the world’s circulation industry, the supply chain with the dominant manufacturer is changed to the supply chain with dominant retailer. On the other hand, in the traditional supply chain, it’s assumed that decision makers always focus on maximizing the profits, but behavioral studies have showed that they have great concern for fairness in real life. Therefore,we introduce the behavior factor of people——fairness concerns into the two-echelon supply chain with the dominant retailer.We first study the unconstrained results of the decision maker’s fairness concerns on the the supply chain under three different cases which are only the supplier, the retailer fairness concerns, both fairness concerns respectively. We show that under the case of only the supplier fairness concerns, the optimal supply quantity and the performance of the supply chain decreases as the fairness concern parameter of supplier increases; under the case of only the retailer fairness concerns, the optimal supply quantity and the performance of the supply chain increases as the fairness concern parameter of retailer increases, the supply chain can coordinate when the fairness concern parameter of retailer is equal to 1; under the case of both fairness concerns, the more generous the retailer is and spite the supplier is, the more the system’s optimal supply quantity is, and the more the the system’s performance is.Finally, numerical examples are offered to illustrate the results.Then we analyze the constrained results of the decision maker’s fairness concerns on the the supply chain under the same three different cases. We show that under the case of only the supplier fairness concerns, the supplier will be spiteful when the retailer sets a very low procurement price; the supplier will be generous when the retailer sets a very high procurement price; the supplier will choose a quantity to achieve the equitable allocation and be traditional when the retailer sets a moderate procurement price. Under the case of only the retailer fairness concerns, the retailer will be traditional when retailer’s equitable allocation achieves the traditional result; otherwise, the retailer behaves spitefully(generously) if the retailer demands aproportion of overall profit higher(lower) than the traditional result. Under the case of both fairness concerns, we show that when the procurement price the retailer sets is less than that the retailer’s equitable allocation achieves, the retailer’s fairness preference is spiteful; when the procurement price the retailer sets is bigger than that the retailer’s equitable allocation achieves, the retailer’s fairness preference is generous. When the procurement price the retailer sets is bigger than that the supplier can bear, the supplier’s fairness preference transfers from spite to generosity.