Fairness and Channel Coordination
Tony Haitao Cui, Jagmohan S. Raju, Z. John Zhang
Management Science · 2007 · Volume 53 · Issue 8
Abstract
We incorporate the concept of fairness in a conventional dyadic channel to investigate how fairness may affect channel coordination. We show that when channel members are concerned about fairness, the manufacturer can use a simple wholesale price above her marginal cost to coordinate this channel both in terms of achieving the maximum channel profit and in terms of attaining the maximum channel utility. Thus, channel coordination may not require an elaborate pricing contract. A constant wholesale price will do.
Keywords
distribution channels, fairness, channel coordination, behavioral economics, retailing and wholesaling, pricing
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