Channel coordination under fairness concerns and nonlinear demand

Ozgun Caliskan Demirag, Youhua Chen, Jianbin Li

Research output: Contribution to journalArticle

95 Citations (Scopus)

Abstract

The supply chain literature analyzing supplier-retailer contracts and channel coordination has typically focused on profit or revenue maximization as the members' sole objective. In such settings, it is well known that a simple wholesale price contract is not effective in coordinating the channel due to double marginalization. Recently, Cui et al. [Cui, T.H., Raju, J.S., Zhang, Z.J., 2007. Fairness and channel coordination. Management Science 53 (8) 1303-1314] introduced the members' fairness concerns into channel coordination. Assuming a linear demand function, the authors show that a coordinating wholesale price contract can be designed when only the retailer or both parties are concerned about fairness. In this paper, we extend the authors' results to other nonlinear demand functions that are commonly used in the literature. Our analysis reveals that, compared to the linear demand, the exponential demand function requires less stringent conditions to achieve coordination when only the retailer is fairness-concerned.

Original languageEnglish (US)
Pages (from-to)1321-1326
Number of pages6
JournalEuropean Journal of Operational Research
Volume207
Issue number3
DOIs
StatePublished - Dec 16 2010

Fingerprint

Fairness
Management science
Supply chains
Profitability
Supply Chain
Profit
Demand
Channel coordination
Demand function
Retailers
Wholesale prices

All Science Journal Classification (ASJC) codes

  • Management Science and Operations Research
  • Modeling and Simulation
  • Information Systems and Management

Cite this

@article{f524071e02bc4c5cbae4e16b99da2a1d,
title = "Channel coordination under fairness concerns and nonlinear demand",
abstract = "The supply chain literature analyzing supplier-retailer contracts and channel coordination has typically focused on profit or revenue maximization as the members' sole objective. In such settings, it is well known that a simple wholesale price contract is not effective in coordinating the channel due to double marginalization. Recently, Cui et al. [Cui, T.H., Raju, J.S., Zhang, Z.J., 2007. Fairness and channel coordination. Management Science 53 (8) 1303-1314] introduced the members' fairness concerns into channel coordination. Assuming a linear demand function, the authors show that a coordinating wholesale price contract can be designed when only the retailer or both parties are concerned about fairness. In this paper, we extend the authors' results to other nonlinear demand functions that are commonly used in the literature. Our analysis reveals that, compared to the linear demand, the exponential demand function requires less stringent conditions to achieve coordination when only the retailer is fairness-concerned.",
author = "{Caliskan Demirag}, Ozgun and Youhua Chen and Jianbin Li",
year = "2010",
month = "12",
day = "16",
doi = "10.1016/j.ejor.2010.07.017",
language = "English (US)",
volume = "207",
pages = "1321--1326",
journal = "European Journal of Operational Research",
issn = "0377-2217",
publisher = "Elsevier",
number = "3",

}

Channel coordination under fairness concerns and nonlinear demand. / Caliskan Demirag, Ozgun; Chen, Youhua; Li, Jianbin.

In: European Journal of Operational Research, Vol. 207, No. 3, 16.12.2010, p. 1321-1326.

Research output: Contribution to journalArticle

TY - JOUR

T1 - Channel coordination under fairness concerns and nonlinear demand

AU - Caliskan Demirag, Ozgun

AU - Chen, Youhua

AU - Li, Jianbin

PY - 2010/12/16

Y1 - 2010/12/16

N2 - The supply chain literature analyzing supplier-retailer contracts and channel coordination has typically focused on profit or revenue maximization as the members' sole objective. In such settings, it is well known that a simple wholesale price contract is not effective in coordinating the channel due to double marginalization. Recently, Cui et al. [Cui, T.H., Raju, J.S., Zhang, Z.J., 2007. Fairness and channel coordination. Management Science 53 (8) 1303-1314] introduced the members' fairness concerns into channel coordination. Assuming a linear demand function, the authors show that a coordinating wholesale price contract can be designed when only the retailer or both parties are concerned about fairness. In this paper, we extend the authors' results to other nonlinear demand functions that are commonly used in the literature. Our analysis reveals that, compared to the linear demand, the exponential demand function requires less stringent conditions to achieve coordination when only the retailer is fairness-concerned.

AB - The supply chain literature analyzing supplier-retailer contracts and channel coordination has typically focused on profit or revenue maximization as the members' sole objective. In such settings, it is well known that a simple wholesale price contract is not effective in coordinating the channel due to double marginalization. Recently, Cui et al. [Cui, T.H., Raju, J.S., Zhang, Z.J., 2007. Fairness and channel coordination. Management Science 53 (8) 1303-1314] introduced the members' fairness concerns into channel coordination. Assuming a linear demand function, the authors show that a coordinating wholesale price contract can be designed when only the retailer or both parties are concerned about fairness. In this paper, we extend the authors' results to other nonlinear demand functions that are commonly used in the literature. Our analysis reveals that, compared to the linear demand, the exponential demand function requires less stringent conditions to achieve coordination when only the retailer is fairness-concerned.

UR - http://www.scopus.com/inward/record.url?scp=77957707806&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=77957707806&partnerID=8YFLogxK

U2 - 10.1016/j.ejor.2010.07.017

DO - 10.1016/j.ejor.2010.07.017

M3 - Article

VL - 207

SP - 1321

EP - 1326

JO - European Journal of Operational Research

JF - European Journal of Operational Research

SN - 0377-2217

IS - 3

ER -