Abstract

http://ssrn.com/abstract=2173555
 


 



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


Julie Niederhoff


Syracuse University

Panos Kouvelis


Washington University

January 29, 2015


Abstract:     
Prior experimental research shows that, in aggregate, decision makers acting as suppliers to a newsvendor do not set the wholesale price to maximize supplier profits. However, these deviations from optimal have not been carefully examined at an individual level. In this study, suppliers also set wholesale price contracts which deviate from profit-maximization in ways that are either generous or spiteful. These deviations are consistent with how the profit-maximizing contract compares to the subject’s idea of a fair contract. Suppliers moved nearer to what they self-reported to be their ideal allocations 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 they make trade-offs between these two oft-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: 28

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

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Date posted: November 11, 2012 ; Last revised: January 30, 2015

Suggested Citation

Niederhoff, Julie and Kouvelis, Panos, Generous, Spiteful, or Profit Maximizing Suppliers in the Wholesale Price Contract: A Behavioral Study (January 29, 2015). 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
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