Supply Chain Contract Design With Other-regarding Fairness Concerns And Experimental Study On Distributional Fairness

In traditional studies of operations management,one of the basic assumptions is that decision-makers,as rational beings,only pursue the profit maximization.However,the findings in behavioral economics indicate that in the economic decision-making process involves with interactions with other people,other than profit,they may also care about whether the distribution of profit is fair.As the most typical and common social preference,fairness concerns often exerts a great influence on the process of negotiatio.n and consultation between people.Thus,to get a better understanding on how typical operation systems work,it is necessary to well understand the impact of fairness concerns in typical decision environments.Focusing on fairness concerns,this paper investigates other-regarding fairness and distributional fairness in appropriate decision-making environments.In specific,this paper first investigates the impact of two kinds of other-regarding fairness on supply chain contract optimization based on theoretical model analysis,and then explores how risk preferences and distributional fairness concerns interact to influence people's decisions in a typical risky environment by means of behavioral experiments.Fairness concerns have been extensively discussed in the studies of supply chain contracts,which can have a great impact on supply chain performance.With the development of research,the investigations of fairness concerns have been extended from a simple supply chain consist of two members to a supply chain with more members,which shows that peer can also play an important role in shaping the fairness perception of decision-makers.By reviewing existing literature,current supply chain contract studies involving fairness concerns always focus on self-centered fairness concerns,i.e.?people only care about whether they are treated fairly.However,a lot of experiments in behavioral economics show that,other than oneself,people may also care about whether others are treated fairly.Based on related findings in psychology and behavioral economics,this paper takes the retailer's concern for whether the peer retailer is treated fairly in a multi-member supply chain into account,presents sympathy or schadenfreude as the cause,and investigates its impact on supply chain contract optimization and design.In the face of others'failure or misfortune,sympathy and schadenfreuden are two kinds of emotional response.Both of them are related with the sense of fairness and reflect people's tendency to correct the unfairness.In a distribution channel consist of a supplier and two retailers,this paper first considers the case where the retailer cares about not only the profit distribution between the supplier and himself(herself)but also the profit distribution between the supplier and the peer retailer,i.e.,peer-regarding fairness for sympathy.Based on the traditional distributional fairness model,this paper depicts the utility function with peer-regarding fairness for sympathy,and explores its impact on the pricing decisions,profits as well as the corresponding supply chain performance.By combining model analysis and illustrative examples,it can be found that while peer-regarding fairness for sympathy can improve the profits of the two retailers as well as the corresponding supply chain performance,it may hurt the supplier.Besides,the retailer can also be punished for his(her)peer-regarding fairness for sympathy.This paper also studies the case where the retailer cares about the fairness of peer retailer due to schadenfreude in the distribution channel,i.e.,peer-regarding fairness for schadenfreude.The results show that,the supplier can take advantage of the fairness concerns to exploit the two retailers and then hurts the corresponding supply chain performance.Besides,this paper compares the two kinds of peer-regarding fairness concerns from different perspectives,and finds that the total profit of the distribution channel can benefit from peer-regarding fairness for schadenfreude on special occasions.The management of supply chain always faces various risks,but the role of risk has not been incorporated in th e studies of supply chain contracts involves fairness concerns.Risk brings uncertainty to the earnings and often leads to the aversion of the decision makers.As a result,there probably exist systematic biases in the conclusions of fairness studies in risky environment if risk aversion is neglected.Current fairness experiments mainly focus on certain environments and can hardly tell us the role of risk.To understand fairness in risky environments,this study preliminarily investigates how risk preferences interact with distributional fairness concerns by means of classic dictator game and ultimatum game.In specific,this paper focuses on a typical risky environment where two players bargain over multiple uncertain prospects,and investigates the roles of fairness and risk preferences,After building the utility function with distributional fairness under the mean-variance framework and deriving the equilibrium results,this paper puts up with some research hypothesis that can be verified by the laboratory data.The main results are shown as follows:(1)compared with dividing certain outcomes,the offers of the proposers are more generous when dividing uncertain prospects;(2)the acceptance thresholds of the responders are higher and,given an offer,the responder is more likely to reject it when dividing uncertain prospects;(3)there are less completely selfish behaviors when dividing uncertain outcomes;(4)a simple model with distributional fairness concerns based on the mean-variance model can explain the data well qualitatively.