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Utility-based two-stage models with fairness concern

Author

Listed:
  • Yong Zha

    (University of Science of Technology of China)

  • Jun Wang

    (University of Science of Technology of China)

  • Nannan Liang

    (University of Science of Technology of China)

  • Chuiri Zhou

    (University of Science of Technology of China)

Abstract

This paper studies the impact of social comparison and fairness concerns on the efficiency of a two-stage process. The decision maker of each stage cares about not only the absolute score of his efficiency, but also the relative status when comparing with the other. By incorporating the utility theory and the concept of fairness, an efficiency-based Neumann–Morgenstern cardinal utility is defined to compose of basic utility from his self-efficiency and additional utility from the fairness concern of the other’s efficiency. Utility-based two-stage models are proposed to optimize the utilities of the stages rather than only the efficiencies instead. We characterize the concern of fairness as advantageous and disadvantageous inequity based on equitable outcome comparison. By investigating the non-cooperating relationship between two stages, we show that the stage dominating the process has the incentive to optimize his efficiency without ignoring that of the other, which is contrary to the conventional situation. In addition, the coefficients of equitable outcome and inequity significantly affect the efficiencies of both stages. We further investigate the cooperation between two stages and find that the efficiencies of the stages vary with the coefficients of unfairness perceptions. Numerical analysis verifies the validity of the proposed models and identifies the impacts of the coefficients of equitable outcome and inequity on the stages’ and overall efficiencies.

Suggested Citation

  • Yong Zha & Jun Wang & Nannan Liang & Chuiri Zhou, 2016. "Utility-based two-stage models with fairness concern," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 24(4), pages 877-900, December.
    • Handle: RePEc:spr:cejnor:v:24:y:2016:i:4:d:10.1007_s10100-015-0425-4
    DOI: 10.1007/s10100-015-0425-4
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    References listed on IDEAS

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    Cited by:

    1. Wu, Jie & Xu, Guangcheng & Zhu, Qingyuan & Zhang, Chaochao, 2021. "Two-stage DEA models with fairness concern: Modelling and computational aspects," Omega, Elsevier, vol. 105(C).
    2. Xu, Guangcheng & Wu, Jie & Zhu, Qingyuan & Pan, Yinghao, 2024. "Fixed cost allocation based on data envelopment analysis from inequality aversion perspectives," European Journal of Operational Research, Elsevier, vol. 313(1), pages 281-295.
    3. Wang, Kai & Zeng, Hao & Yuan, Yue & Zhang, Chong & Liu, Lu, 2022. "Green or non-green: A game to introduce decision making under fairness concerns," Technological Forecasting and Social Change, Elsevier, vol. 185(C).
    4. Sarkar, Sumit & Bhala, Shrey, 2021. "Coordinating a closed loop supply chain with fairness concern by a constant wholesale price contract," European Journal of Operational Research, Elsevier, vol. 295(1), pages 140-156.

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