The Impact Of Fairness On Channel Coordination Under Chinese Cultural Background

The study about fair process reveals that people not only care about the result,but also concern about the process. We incorporate the concept of fairness in aconventional dyadic channel to investigate how fairness may affect channelcoordination. Studies have already found that when the channel members areconcerned about fairness, the manufacturer can use a wholesale price above themarginal cost to coordinate the channel both in terms of achieving the maximumchannel profit and in terms of attaining the maximum channel utility. Thus, channelcoordination may not require an elaborate pricing contract. A constant wholesale pricewill do. But the model assumes that people will have a negative reaction whether it ispositive or negative inequity.We found that most people will have determinately negative reaction to negativeinequity. But it seems not that all people will have a negative reaction to positiveinequity because of cultural differences. Thus, in order to make the model closer toreality, we have studied the situation that these manufacturer or retailer would have apositive reaction to positive inequity. We also studied the reaction of people toinequity in the context of Chinese culture. We found that people will have adeterminately negative reaction to negative inequity, while most people do not have anegative reaction to positive inequity. Thus, the article proposed four different models, and found that the supply chain can be coordinated when the retailer have a negativereaction to positive inequity.The main innovation of this paper is to incorporate the concept of fairness in aconventional dyadic channel, and the introduction of the concept of the two inequity,making the model more realistic. In practical applications, the members of the supplychain can use the conclusion of this article to predict the coordination of the supplychain with the understanding of the reactions of the other members to inequity.