Abstract
Previous research works focused on profit or monetary payoff maximization as the decision maker’s sole objective in coordinating the channel. However, the decision maker may deviate from his best response for some implicit reasons, which is called boundedly rational behaviors. Recently, fairness has been widely used to explain why the decision maker will have these incompletely rational behaviors. Cui et al. (2007) introduced fairness concerns into channel coordination in a dyadic model setting. The author showed that a simple wholesale price contract is still effective in coordinating the channel when fairness is involved. They demonstrated that the retailer would sacrifice his own profit to punish or reward the manufacturer’s wholesale price setting. In this thesis, we extend fairness concerns to a dual model setting, where the manufacturer can sell products to customers directly. Firstly, we analyze the retailer’s pricing strategy and find out the retailer would deviate from his profit maximized decision when the manufacturer’s wholesale price is too high or too low. Furthermore, it's discussed that the influence on manufacturers' profit brought by the different degrees of fairness the retailer requests, and we propose appropriate corresponding strategies for the manufacturer to adopt. Besides, based on the results, we find out that the dual channel setting requires less stringent condition to achieve coordination when only the retailer is fairness concerned.