The Impact of Consumer Fairness Seeking on Distribution Channel Selection: Direct Selling vs. Agent Selling

Zelong Yi, Yulan Wang, Yun Liu and Ying†Ju Chen

Production and Operations Management, 2018, vol. 27, issue 6, 1148-1167

Abstract: Consumers seek for not only base functionalities of products they buy but also fairness in transactions. In this work, we investigate how such fairness†seeking behavior affects a manufacturer's distribution channel structure selection. Specifically, the manufacturer can sell the product directly to consumers (named direct selling) or via a middleman retailer (named agent selling). The manufacturer then decides which distribution channel to adopt with an aim to maximize his profit. Under a newsvendor framework, the distribution channel structure endogenizes the procurement cost and thus impacts consumers’ fairness perception and willingness to pay. Interestingly, we show that it may be in the manufacturer's best interest to downward decentralize his distribution channel by adopting agent selling when consumers are extremely fairness†minded. However, when the consumer's fairness concern is weak, direct selling is preferred by the manufacturer. We further show that the above results qualitatively hold when we take into consideration the downstream competition, the dominance of the manufacturer in retail pricing and the heterogeneity of the consumers in their fairness seeking.

Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (29)

Downloads: (external link)
https://doi.org/10.1111/poms.12861

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:popmgt:v:27:y:2018:i:6:p:1148-1167

Ordering information: This journal article can be ordered from
http://onlinelibrary ... 1111/(ISSN)1937-5956

Access Statistics for this article

Production and Operations Management is currently edited by Kalyan Singhal

More articles in Production and Operations Management from Production and Operations Management Society
Bibliographic data for series maintained by Wiley Content Delivery ().