Fairness and Channel Coordination

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Marketing Papers
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distribution channels
fairness
channel coordination
behavioral economics
retailing and wholesaling
pricing
Advertising and Promotion Management
Business
Business Administration, Management, and Operations
Marketing
Operations and Supply Chain Management
Sales and Merchandising
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Cui, Tony Haitao
Raju, Jagmohan S
Zhang, Z. John
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Abstract

We incorporate the concept of fairness in a conventional dyadic channel to investigate how fairness may affect channel coordination. We show that when channel members are concerned about fairness, the manufacturer can use a simple wholesale price above her marginal cost to coordinate this channel both in terms of achieving the maximum channel profit and in terms of attaining the maximum channel utility. Thus, channel coordination may not require an elaborate pricing contract. A constant wholesale price will do.

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2007-08-01
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Management Science
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