Supply chain product innovation and marketing strategies under different fairness concerns

As product performance requirements continue to increase among customers, companies’ innovation activities continue to advance, which leads to an increasing pace of product updates and iterations. Product innovation disrupts the original state of product demand and affects supply chain revenue. Uneven revenue distribution can cause fairness concerns and then affect the decisions of supply chain members. We introduce fairness concerns in the supply chain, studying product innovation and marketing strategies where manufacturers are responsible for innovation and retailers are responsible for sales. We consider different types of fairness concerns based on the position of supply chain members and explore the impact of these fairness concerns on optimal product innovation and marketing strategies. We find that jealousy fairness concerns decrease the retailer's product marketing strength and do not affect the manufacturer's product innovation level. Sympathy fairness concerns increase the manufacturer's product innovation level and do not affect the retailer's product marketing strength. Furthermore, regardless of the type of fairness concerns, the manufacturer's strong bargaining power benefits product innovation and marketing. The difference is that the bargaining power increases the positive impact of sympathy fairness concerns on product innovation, but decreases the negative impact of jealousy fairness concerns on product marketing. Finally, we show that in a supply chain with fairness concerns, manufacturers in a leadership position better support product innovation and marketing.