Journal of Shanghai Jiao Tong University(Science) ›› 2015, Vol. 20 ›› Issue (6): 743-751.doi: 10.1007/s12204-015-1685-9

• Research article • Previous Articles     Next Articles

Fairness-Embedded Governmental Coordination by Dominated Retailer in Heterogeneous Circumstance

Guang-hua HAN1, Xu-jin PU2,*(), Geng-xi DAI3,*()   

  1. 1 School of International and Public Affairs, Shanghai Jiaotong University, Shanghai 200030, China
    2 School of Business, Southern Yangtze University, Wuxi 214122, Jiangsu, China
    3 School of Management Science & Industrial Engineering, Qingdao University, Qingdao 266071, Shandong, China
  • Received:2014-05-26 Online:2015-12-20 Published:2020-10-09
  • Contact: Xu-jin PU,Geng-xi DAI;
  • Supported by:
    The National Natural Science Foundation of China (Nos.71371086 and 71501128);The Central University Basic Research Funds (No.JUSRP51416B);The Inter-discipline Foundation of Shanghai Jiao Tong University (No.15JCZY05);The Shandong Social Science Planning Fund (No.14CGLJ07);The Shandong Provincial Natural Science Foundation (No. 2015ZRB019HR)


Market demand is positively affected by the investments in marketing and quality improvement. In a retailer dominated supply chain, the manufacturer takes charge of product quality improvement and the retailer focuses on marketing. The investments on cooperative marketing and product quality improvement in supply chains are known to be heterogeneous investment, where the manufacturer (he) is fairness sensitive and the retailer (she) is fairness insensitive. Due to the manufacturer's conservative investment resulting from this sensitivity of fairness, the retailer shares a proportion of the manufacturer's investment to increase his investment. It is found that the manufacturer's fairness negatively affects his investment and the manufacturer sometimes tends to be a ‘free rider' under decentralized decision patterns, which lead to a poor supply chain performance. This study also proves that both the manufacturer and the retailer are motivated to cooperate under centralized patterns, where the retailer's objective is additional expected profit and the manufacturer's objective is enlarging his utility. Based on the comparison of equilibrium solutions in decentralized and centralized patterns, this study suggests the range of cost-sharing proportion for supply chain coordination. The example shows the effectiveness of the provided supply chain coordination.

Key words: heterogeneous circumstance|Stackelberg game|fairness|supply chain coordination

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