Fairness and Channel Coordination
Management Science, Vol. 53, No. 8, pp. 1303-1314, 2007
28 Pages Posted: 15 Jun 2009
Date Written: August 2007
In this paper, we incorporate the concept of fairness in a conventional dyadic channel to investigate how fairness may affect channel coordination. We show that when channel members are concerned about fairness, the manufacturer can use a simple wholesale price above its marginal cost to coordinate this channel both in terms of achieving the maximum channel profit and in terms of attaining the maximum channel utility. Thus, channel coordination may not require an elaborate pricing contract. A constant wholesale price will do.
Keywords: Distribution Channels, Fairness, Channel Coordination, Behavioral Economics
JEL Classification: D03, D74, D86, L11, L43, M31, M38
Suggested Citation: Suggested Citation