Pricing Decisions in Closed-Loop Supply Chains with Peer-Induced Fairness Concerns

Yadong Shu, Ying Dai and Zujun Ma
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Yadong Shu: Institute for Logistics and Emergency Management, School of Economics and Management, Southwest Jiaotong University, Chengdu 610031, China
Ying Dai: Institute for Logistics and Emergency Management, School of Economics and Management, Southwest Jiaotong University, Chengdu 610031, China
Zujun Ma: Institute for Logistics and Emergency Management, School of Economics and Management, Southwest Jiaotong University, Chengdu 610031, China

Sustainability, 2019, vol. 11, issue 18, 1-19

Abstract: The importance of behavioral factors in the process of decision making is widely recognized in literature and practice. The aim of this paper is to examine the influence of collectors’ multiple fairness concerns on pricing decisions in a closed-loop supply chain (CLSC), which consists of one manufacturer, one retailer, and two collectors. Specifically, the collectors are concerned with both distributional fairness and peer-induced fairness. By considering fairness concerns and selecting Nash bargain solution as the reference point of fairness distribution, this paper studies the equilibrium solution of Stackelberg game models in the CLSC with symmetrical and asymmetrical information of fairness concerns, respectively. The results show that in the former case, distributional fairness is always at the cost of sacrificing the manufacturer’s profits, which is a means of gaining more benefits for the collectors. In the latter case, the profits of both the manufacturer and the collectors turn into a loss. No matter in which case, the collector who is concerned with both distributional and peer-induced fairness is always in a passive position. Generally speaking, whether the decision maker concerns fairness and whether it can be perceived by the CLSC members both impact the members’ decision making. Additionally, the utilities of both the manufacturer and the collectors receive Pareto improvement under the proposed incentive contract.

Keywords: closed-loop supply chain; distributional fairness concern; peer-induced fairness concern; Nash Bargain (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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