The Effect Of Altruism Preference On Decisions-making Of Dual-channel Supply Chain In E-commerce

Most of previous literature on dual-channel supply chain based on the hypothesis ofHomo Economicus. However, human decision is strongly affected by human behavior,which is proved by the emergence and development of Behavioral Economics andExperimental Economics. As a result, Behavioral Operations Management (BOM), aninterdisciplinary research on operations management combining Social Psychology andCognitive Psychology, becomes a new hot spot. This study focus on member’s altruismpreference in dual-channel supply chain, analyzes the effect of member’s altruismpreference on pricing strategy, quality investment and innovation investment in two classicdual-channel supply chains respectively.To begin with, the basic conception and relative theories of social preference anddual-channel supply chain are introduced, and previous literature are summarized. Then weintroduce the conception of product web-fit, analyze and compare the optimal pricing intwo dual-channel supply chains with and without altruism preference. The results show that,in supplier-dual-channel supply chain(supply chain A), the supplier’s wholesale pricedecreases with supplier’s altruism and increases with retailer’s altruism, the retailer’s retailprice increases with supplier’s altruism and decreases with retailer’s altruism. It means thatthe more altruistic a player is, the more beneficial for the other player. But inretailer-dual-channel supply chain(supply chain B), the relation between player’s altruismand pricing strategy is affected by product web-fit. In addition, the online price is lowerthan the traditional price in dual-channel supply chain when the supplier and the retailer areboth altruistic. The product web-fit also affects pricing strategy.Since product price is not the most important factor affecting consumer’s purchase, more attention has been paid on product quality, then we analyze the effect of player’saltruism on supplier’s quality investment. It is indicated that, quality investment contributsto quality improvement and demand increasing, which is always beneficial to the retailer.When the supplier’s profit decreases after quality investment, it is good for the retailer andthe supplier to sign an appropriate contract with the retailer in which the retailer providesquality investment compensation to the supplier. A more important result is that, in the twodual-channel supply chains, the supplier’s altruism is good for the retailer but not for thesupplier himself, and the retailer’s altruism is good for the supplier but not for the retailerhimself, which means the playes’s altuism is beneficial to his cooperative opposite.Quality investment improves product quality, but also increases product cost andincreases price in the meanwhile. A hypothesis that the supplier decrease product costthrough innovation is assumed in the last chapter, and the incentive of government subsidyfor innovation is considered. It is shown that, the innovation level in supply chain A ishigher than supply chain B, and the government subsidy is incentive for innovation, and theoptimal subsidy rate is figured out. Another important conclusion shows that, when thevariable cost of product is lower than a certain value, the supplier’s altruism is good for theretailer but not for the supplier himself, and the retailer’s altruism is good for the supplierbut not for the retailer himself. However, when the variable cost of product exceed thatcertain value, the supplier’s altruism is good for himself but not for the retailer, and theretailer’s altruism is good for himself but not for the supplier.A brief summary and future research are given in the end. Our study enriches thedual-channel supply chain management theory, and provides some useful suggestions onimproving product quality and innovation for corporations in E-commerce, and points outsome meaningful innovation incentive strategy for the government.