SERVICE AND REVENUE SHARING STRATEGIES IN A DUAL-CHANNEL SUPPLY CHAIN WITH FAIRNESS CONCERNS

Ming-xing Xu^{1, 2}, Yue Yu¹, Yong-shi Hu³

¹School of Economics &Management Fuzhou University, Fuzhou City, Fujian Province, China

²Concord University College of Fujian Normal University, Fuzhou City, Fujian Province, China

³Department of Traffic and Transportation, Fujian University of Technology, Fuzhou City, Fujian Province, China

This paper incorporates the concept of fairness in a dual-channel supply chain to examine the effect of fairness concerns on the supply chain partners’ service and revenue-sharing strategies in three different scenarios: only the retailer is concerned about fairness, only the manufacturer is concerned about fairness, and both parties are concerned about fairness. Though applying the equilibrium analysis, the results show that (1) Fairness concerns strongly influence the manufacturer’s and the retailer’s decision-making and utility. (2) The revenue sharing ratio increases with the strengthening of channel members’ fairness concerns. (3) If only the retailer is concerned about fairness, the retailer’s service is unaffected by his fairness concerns. (4) There exists a Pareto improvement for channel members’ utility when the manufacturer without fairness concern becomes fair-minded.