Procedural Fairness Concerns In Supply Chain With Promotional Effort

Traditional supply chain management research is based on the rational agents hypothesis.However,with the rapid development of current economy and information technology,the old study framework cannot explain all problems in reality.Bounded rationality have taken place of completed rationality to become the main stream theory for its mighty explaining ability.It is decision-making behavior that is rational,but limited(bounded)by an individual's ability to process information.Decision-making process will be affected by different kinds of individual's behavioral preferences.Fairness concerns are one of typical behavioral preferences widely existed in the interaction between decision-makers.It is so common that can be illustrated in a lot of practices and researches.Over the last few decades,the development of fairness concerns has come to include two main dimensions—distributional and procedural.Distributional fairness concerns refer to that people prefer a higher payoff,what matters the relative size compared with other people.Besides,people also pursue fair process in the way that the decision is made and the outcomes reached.This refers to procedural fairness concerns that people care whether procedures used to produce the payoff are fair.Although many researchers have paid their attention to distributional fairness concerns in supply chain by analytical models or experimental investigation,they ignored channel member's desire for fair process and the literature has a lack of modeling of procedural fairness concerns in the supply chain level.However,many cases show that procedural fairness and distributional fairness are equally important to supply chain relationship.Therefore,this paper builds a supply chain model considering procedural fairness concerns and investigates procedural fairness concerns'influences on the supply chain decisions and coordination.Besides,this paper compares the influences of procedural fairness concerns and distributional fairness concerns on supply chain.Our model considers a classic Stackelberg game problem which contains one supplier and one retailer who have procedural fairness concerns in sales promotional environment.According to existing literature,we use engagement to depict fair process.The supplier,as the leader,has the authority to decide whether to use a fair process.As the follower,the retailer judge whether the procedure is fair or not.Procedural fairness concerns work when the fair process is not used and the retailer finds his actual profit is less than his procedural fairness reference point.This will induce a disutility to the retailer.Based on the model,this paper can be divided into two parts:Chapter 3 analyzes respective decisions of the supplier and the retailer and solve the market equilibrium results.Then we investigate how procedural fairness concerns affect supply chain decisions and performances.Finally,the analysis about the coordination of supply chain is also included in this chapter.Chapter 4 compares the equilibrium results on the condition that the retailer has procedural fairness concerns or distributional fairness concerns.The main conclusions show as follows:(1)In sales promotional environment,whether or not the retailer has procedural fairness concerns,the supplier will not follow a fair process.(2)Under the effect of procedural fairness concerns,the retailer cannot get profit improvements when his unfairness aversion is beyond a certain threshold,but the whole channel surplus can always be improved.(3)A new mechanism combining wholesale price contract with slotting allowances is proposed to coordinate the behavior supply chain.(4)The retailer profits more from distributional fairness concerns but procedural fairness concerns are more beneficial to the whole channel performance.The research of this paper is the basic and preliminary study of procedural fairness concerns in supply chain.Besides,it is closely related to commercial operation.It not only extend the research of fairness concerns behavior and supply chain management in academic,but also provides useful management insights in practice to supply chain decisions.