Manufacturer Encroachment With Fairness Concern

In the face of growing market space,more and more manufacturers choose to open their own direct selling channels.At the same time,retailers with their various advantages,gradually have channel control ability.In the retailer-dominated supply chain,when there is a difference between the manufacturer’s profit and the retailer’s profit,the manufacturer will have a sense of unfair.Similarly,when the manufacturer chooses to encroach the market,the retailer will also appeal for fairness in the face of the profit gap.The fairness concern of supply chain members arises at the right moment.This thesis considers a two-level supply chain system consisting of a manufacturer and a retailer,and analyzes the influence of fairness concern on manufacturer’s encroachment decision.First,this thesis establishes a manufacturer encroachment model without fairness concern,and solve the decision and profit without encroachment and with encroachment.The results show that when the manufacturer’s direct selling cost is small,the manufacturer will choose to encroach.Only in a small part of the case where the cost of direct selling channel is small and the level of channel substitution is large,the manufacturer encroachment can increase the retailer’s profit.On this basis,this thesis takes the fairness concern of the manufacturer into account,establishes the encroachment model with manufacturer’s fairness concern,solves the equilibrium solution,and compares the results with those without fairness concern to get manufacturer’s encroachment decision.The results show that when the fairness concern level is large,the cost of direct selling channel and the substitutability of channel are at the medium level,the manufacturer will not choose to encroach.The encroachment of the manufacturer with fairness concern will give the retailer a better chance to benefit from encroachment.Manufacturer’s fairness concern can improve the total profit of supply chain when the cost of direct selling channel is very high.In addition,this thesis also considers the retailer’s fairness concern,establishes a two-channel model with retailer’s fairness concern,solves the equilibrium solution and profit,compares the results with those without fairness concern and with manufacturer’s fairness concern to get the retailer’s fairness concern’s influence.The results show that the increase of the degree of the retailer’s fairness concern will lead to a decrease in both the retailer’s and the manufacturer’s profit.But the retailer will feel fair because the gap between the retailer’s and the manufacturer’s profit is reduced.When the direct selling channel cost is low,the retailer’s profit will be damaged by the manufacturer’s encroachment.In other cases,the retailer can benefit from it.In the context of the dominant retailer,this thesis considers the fairness concern of supply chain members and studies the issue of manufacturer encroachment.The conclusions can provide some support for enterprises in the supply chain in pricing and decision-making,which has theoretical and practical significance.