Distributional and Peer‐Induced Fairness in Supply Chain Contract Design

By Teck-Hua Ho, Xuanming Su, Yaozhong Wu. Production and operations management, 2013

252 citations recorded by the source corpus.

Members of a supply chain often make profit comparisons. A retailer exhibits peer‐induced fairness concerns when his own profit is behind that of a peer retailer interacting with the same supplier. In addition, a retailer exhibits distributional fairness when his supplier's share of total profit is larger than his own. While existing research focuses exclusively on distributional fairness concerns, this study investigates how both types of fairness might interact and influence economic outcomes in a supply chain. We consider a one‐supplier and two‐retailer supply chain setting, and we show that (i) in the presence of distributional fairness alone, the wholesale price offer is lower than the standard wholesale price offer; (ii) in the presence of both types of fairness, the second wholesale price is higher than the first wholesale price; and (iii) in the presence of both types of fairness, the second retailer makes a lower profit and has a lower share of the total supply chain profit than the first retailer. We run controlled experiments with subjects motivated by substantial monetary incentives and show that subject behaviors are consistent with the model predictions. Structural estimation on the data suggests that peer‐induced fairness is more salient than distributional fairness.

Subfields: Management Information Systems, Safety Research, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/9a2006dac8806424ddb922186ae5e5ada69eb8a9

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Management Information Systems

1. Valery Pavlov
2. Xiaojun Wang
3. Elena Katok
4. Min Zhou
5. Xu Chen
6. Xuanming Su

In Safety Research

1. Valery Pavlov
2. Elena Katok
3. Xuanming Su

In Strategy and Management

1. Xiaojun Wang
2. Elena Katok
3. Min Zhou
4. Valery Pavlov
5. Xu Chen

Citations in the corpus

• Fairness in supply chain contracts: A laboratory study (2013, background): “Ho et al. (2012) extend the model to a setting with multiple retailers and add peer-induced fairness.”
• Firms’ green R&D cooperation behaviour in a supply chain: Technological spillover, power and coordination (2019, background): “The importance of fairness issues in resource allocation/distribution has been well documented and studied in various settings (Bertsimas et al. 2011; Ho et al. 2014; Zhou et al. 2016).”