Events

Dr. Deming Zhou
Associate Professor
Decisions, Operations, and Technology Management
Peking University HSBC Business School, Shenzhen

ABSTRACT

Fairness concerns in the supply chain management have recently caught much attention in the OM research community. The combined effect of fairness and competition on supply chain coordination and the interplay between them, however, have yet to be thoroughly examined. We study a multiplayer supply chain with one supplier and two competing retailers with fairness concerns by a three-player Stackelberg game model. The theoretical study provides comprehensive equilibrium solutions with panoramic views about the interaction of fairness and competition combinations, and summarizes such equilibrium decisions into a depiction of two thresholds strategies for the supplier. Analyzing such equilibriums with closed form solutions, we find the reasons why some of previous literatures claim that a simple wholesale price cannot coordinate the whole supply chain. We also provide exact range of fairness and competition intensity that supply chain can be coordinated. More importantly, we find the counteractive effect of competition and fairness concerns in the supply chain coordination. Although fairness concerns always decrease the wholesale price and increases retailers’ profit share and thus lead to supply chain coordination, downstream competition weakens such effects and decreases downstream players’ market share. Besides theoretical analysis, we also conduct standard economic experiments and estimate structural parameters using experimental data. The experiments confirm the existence of fairness concerns and the interaction of competition and fairness, as shown in our theoretical analysis.