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Fairness and Channel Coordination

Author

Listed:
  • Tony Haitao Cui

    (Carlson School of Management, University of Minnesota, Minneapolis, Minnesota 55455)

  • Jagmohan S. Raju

    (The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

  • Z. John Zhang

    (The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

Abstract

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 her 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.

Suggested Citation

  • Tony Haitao Cui & Jagmohan S. Raju & Z. John Zhang, 2007. "Fairness and Channel Coordination," Management Science, INFORMS, vol. 53(8), pages 1303-1314, August.
    • Handle: RePEc:inm:ormnsc:v:53:y:2007:i:8:p:1303-1314
    DOI: 10.1287/mnsc.1060.0697
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    References listed on IDEAS

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