Fairness and Channel Coordination

Haitao Cui, Jagmohan S. Raju () and Z. John Zhang ()
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Jagmohan S. Raju: The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104
Z. John Zhang: The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104

Management Science, 2007, vol. 53, issue 8, 1303-1314

Abstract: We incorporate the concept of fairness in a conventional dyadic channel to investigate how fairness may affect channel coordination. We show that when channel members are concerned about fairness, the manufacturer can use a simple wholesale price above her marginal cost to coordinate this channel both in terms of achieving the maximum channel profit and in terms of attaining the maximum channel utility. Thus, channel coordination may not require an elaborate pricing contract. A constant wholesale price will do.

Keywords: distribution channels; fairness; channel coordination; behavioral economics; retailing and wholesaling; pricing (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (220)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:53:y:2007:i:8:p:1303-1314

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