Pricing Decisions in Closed-Loop Supply Chains with Peer-Induced Fairness Concerns

• Main Authors: Yadong Shu, Ying Dai, Zujun Ma
• Format: Article
• Language: English
• Published: MDPI AG 2019-09-01
• Series: Sustainability
• Subjects: closed-loop supply chain; distributional fairness concern; peer-induced fairness concern; Nash Bargain
• Online Access: https://www.mdpi.com/2071-1050/11/18/5071

The importance of behavioral factors in the process of decision making is widely recognized in literature and practice. The aim of this paper is to examine the influence of collectors’ multiple fairness concerns on pricing decisions in a closed-loop supply chain (CLSC), which consists of one manufacturer, one retailer, and two collectors. Specifically, the collectors are concerned with both distributional fairness and peer-induced fairness. By considering fairness concerns and selecting Nash bargain solution as the reference point of fairness distribution, this paper studies the equilibrium solution of Stackelberg game models in the CLSC with symmetrical and asymmetrical information of fairness concerns, respectively. The results show that in the former case, distributional fairness is always at the cost of sacrificing the manufacturer’s profits, which is a means of gaining more benefits for the collectors. In the latter case, the profits of both the manufacturer and the collectors turn into a loss. No matter in which case, the collector who is concerned with both distributional and peer-induced fairness is always in a passive position. Generally speaking, whether the decision maker concerns fairness and whether it can be perceived by the CLSC members both impact the members’ decision making. Additionally, the utilities of both the manufacturer and the collectors receive Pareto improvement under the proposed incentive contract.