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Social Preferences and Supply Chain Performance: An Experimental Study

Author

Listed:
  • Christoph H. Loch

    (Technology and Operations Management, INSEAD, 77305 Fontainebleau, France)

  • Yaozhong Wu

    (Department of Decision Sciences, National University of Singapore Business School, Singapore 117592, Singapore)

Abstract

Supply chain contracting literature has traditionally focused on aligning incentives for economically rational players. Recent work has hypothesized that social preferences, as distinct from economic incentives, may influence behavior in supply chain transactions. Social preferences refer to intrinsic concerns for the other party's welfare, reciprocating a history of a positive relationship, and intrinsic desires for a higher relative payoff compared with the other party's when status is salient. This article provides experimental evidence that social preferences systematically affect economic decision making in supply chain transactions. Specifically, supply chain parties deviate from the predictions provided by self-interested profit-maximization models, such that relationship preference promotes cooperation, individual performance, and high system efficiency, sustainable over time; whereas status preference induces tough actions and reduces both system efficiency and individual performance.

Suggested Citation

  • Christoph H. Loch & Yaozhong Wu, 2008. "Social Preferences and Supply Chain Performance: An Experimental Study," Management Science, INFORMS, vol. 54(11), pages 1835-1849, November.
    • Handle: RePEc:inm:ormnsc:v:54:y:2008:i:11:p:1835-1849
    DOI: 10.1287/mnsc.1080.0910
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    References listed on IDEAS

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