Generous, Spiteful, or Profit Maximizing Suppliers in the Wholesale Price Contract: A Behavioral Study

Julie Niederhoff

Syracuse University

Panos Kouvelis

Washington University

November 1, 2012

Prior experimental research shows that — in aggregate — decision makers do not set wholesale price contracts which maximize supplier profits. However, these deviations from optimal have not been carefully examined at an individual level. In this study, suppliers setting wholesale price contracts are willing to sacrifice their own profits to reach a more equitable split in ways that are both generous and spiteful depending on how the profit-maximizing contract compares to their idea of a fair contract. Suppliers in this study moved nearer to what they self-reported to be their ideal allocations, especially when they indicated a high degree of concern for fairness. In short, people like to earn money, but they also care about social preferences and make trade-offs between these two often conflicting influences. They are generous, spiteful, and profit seeking as the situation warrants consistent with their stated preferences and, in fact, are more often generous than spiteful.

Number of Pages in PDF File: 24

Keywords: Behavioral Operations, wholesale price, fairness, supply chain, newsvendor, behavior, newsvender

working papers series

Download This Paper

Date posted: November 11, 2012 ; Last revised: May 8, 2013

Suggested Citation

Niederhoff, Julie and Kouvelis, Panos, Generous, Spiteful, or Profit Maximizing Suppliers in the Wholesale Price Contract: A Behavioral Study (November 1, 2012). Available at SSRN: http://ssrn.com/abstract=2173555 or http://dx.doi.org/10.2139/ssrn.2173555

Contact Information

Julie Niederhoff (Contact Author)
Syracuse University ( email )
900 S. Crouse Avenue
Syracuse, NY 13244-2130
United States
Panos Kouvelis
Washington University ( email )
One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States
Feedback to SSRN

Paper statistics
Abstract Views: 363
Downloads: 56
Download Rank: 228,357

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo7 in 0.265 seconds