Social Preferences and Supply Chain Performance: An Experimental Study

Christoph Loch () and Yaozhong Wu ()
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Yaozhong Wu: Department of Decision Sciences, National University of Singapore Business School, Singapore 117592, Singapore

Management Science, 2008, vol. 54, issue 11, 1835-1849

Abstract: Supply chain contracting literature has traditionally focused on aligning incentives for economically rational players. Recent work has hypothesized that social preferences, as distinct from economic incentives, may influence behavior in supply chain transactions. Social preferences refer to intrinsic concerns for the other party's welfare, reciprocating a history of a positive relationship, and intrinsic desires for a higher relative payoff compared with the other party's when status is salient. This article provides experimental evidence that social preferences systematically affect economic decision making in supply chain transactions. Specifically, supply chain parties deviate from the predictions provided by self-interested profit-maximization models, such that relationship preference promotes cooperation, individual performance, and high system efficiency, sustainable over time; whereas status preference induces tough actions and reduces both system efficiency and individual performance.

Keywords: social preference; relationship; status; supply chain performance; experimental economics (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (124)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:54:y:2008:i:11:p:1835-1849

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