Marketing channel coordination mechanism based on fairness preferences
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    Abstract:

    The pricing mechanism of the channel coordination between manufacturers and retailers is studied in this paper. A fairness preference theory in behavioral economics is embedded in channel research of coordination. The channel,based on different ranges of the fairness preference coefficient,falls into four types, namely,the narrow self-interest type,the competitive preference type,the avoiding unfair preference one and the social welfare preference one. Among them,the narrow self-interest type is a fully rationality; channels coordination with fully rationality is a special case of this paper. Retailers’utility function is modeled based on the theory of fairness preference. Stackelberg game model of the channel coordination is studied regarding four types. The results show that: if there is no other coordination mechanism,1) Channel coordination can not be achieved in either type: i. e. ,the narrow self-interest type and the competitive preference type. 2) Channel coordination can be achieved in the types of the avoiding unfair preference type and the social welfare preferences type,when a fair preference coefficient and other parameters satisfy certain conditions,and both sides of the channel can derive equal utility. 3) Channel coordination can be achieved in fairness preference,with the total utility of the channels up by 33.33%. This shows that: the introduction of the fairness preference theory in the channels decision-making is a Pareto improvement. Finally,the implication for further research is discussed.

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  • Online: April 14,2018
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