Fairness and Channel Coordination

Cui, Haitao (Tony); Raju, Jagmohan S.; Zhang, Z. John

Download This Paper

Open PDF in Browser

Add Paper to My Library

Fairness and Channel Coordination

Management Science, Vol. 53, No. 8, pp. 1303-1314, 2007

28 Pages Posted: 15 Jun 2009

See all articles by Haitao (Tony) Cui

Jagmohan S. Raju

University of Pennsylvania - Marketing Department

Z. John Zhang

University of Pennsylvania - The Wharton School - Department of Marketing

Date Written: August 2007

Abstract

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

Cui, Haitao (Tony) and Raju, Jagmohan S. and Zhang, Z. John, Fairness and Channel Coordination (August 2007). Management Science, Vol. 53, No. 8, pp. 1303-1314, 2007, Available at SSRN: https://ssrn.com/abstract=1419164