On Pricing and Coordination of Dual Channel Supply Chain with Fairness-Concerned Manufacturer as the Stackelberg Leader

We incorporate the concept of fairness in a conventional dyadic dual-channel supply chain to investigate how fairness may affect channel coordination. Three different situations are considered: the centralized supply chain model, the decentralized supply chain model and the decentralized supply chain model with fairness concerned manufacturer. We show that when manufacturer is concerned about fairness, the manufacturer cannot use a simple wholesale price to coordinate this channel in terms of achieving the maximum channel profit. We also find that manufacturer's fairness concern have small effects to the retailer's profits, but may be beneficial to himself. Finally, we present a simulation example to illustrate the magnitude of supply chain and supply chain members' profits under different scenarios.