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

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

Open PDF in Browser Download This Paper

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
Feedback to SSRN

Paper statistics
Abstract Views: 453
Downloads: 61
Download Rank: 235,277

© 2015 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo1 in 1.203 seconds