Supply Chain Decisions and Coordination under the Combined Effect of Overconfidence and Fairness Concern

Abstract

The purpose of this study was to examine the joint effect of overconfidence and fairness concern on supply chain decisions and design contracts to achieve a win-win situation within the supply chain. For this study, a centralized supply chain model was established without considering the retailers’ overconfidence and fairness concern. Furthermore, the retailers’ overconfidence and fairness concerns were introduced into the decentralized supply chain, while the Stackelberg game model between the manufacturer and the retailer was built. Furthermore, an innovative supply chain contract, i.e., buyback contract, with promotional cost sharing was designed to achieve supply chain coordination along with overconfidence and fairness concern. Finally, a numerical analysis was also conducted to analyze the effect of overconfidence, fairness concern, and the validity of the contract. The principal findings of the study include the positive correlation between retailers’ overconfidence and optimal order quantity, sales effort, expected utility, and profit. Although the order quantity and sales efforts were not affected by the fairness concern of the retailer, the contract achieved coordination with a win-win outcome when the level of overconfidence and fairness concern was moderate.

Supply Chain Emission Reduction Decisions, Considering Overconfidence under Conditions of Carbon Trading Price Volatility

“…However, in low-carbon supply chains, overconfidence can also affect the amount of money firms invest in R&D for emission reduction. Studies by Liu [47] and Lu [48] et al concluded that overconfidence can lead to greener, low-carbon products, but at the same time can lead to higher costs and less profitability for firms [42]. This paper constructs a supply chain system with one retailer and one manufacturer and introduces the behavioral characteristics of manufacturer overconfidence.…”

“…Some studies also examine the impact of the interaction effect of overconfidence and social preferences on supply chains. Examples include discussing the interaction effect of overconfidence with equity concerns [40][41][42] and risk aversion [43] on supply chain performance. The second strand of literature examines the impact of overconfidence on supply chain coordination.…”

Effect of fairness and overconfidence on pricing strategy of substitute bundles in a two-echelon supply chain

“…Xiao et al [43] designed different types of optimal contracts to study the interactive impact of fairness and overconfidence in a two-echelon SC. Zhijian et al [49] also analyzed the combined effect of overconfidence and fairness on wholesale price, sales price, sales effort, and expected profits under demand uncertainty.…”

“…As an outcome, the retailer reduced his order quantity and increased retail price because of the belief that P&G is unfair in sharing the profit [28]. In the literature, though the effects of fairness concern [36], and overconfidence behaviour [24] on SCs have been studied separately, there are scanty investigations [43,49] with the combined effect of the above two characteristics of SC members. In the context of the above available literature, the following research questions arise: (a) What will be the pricing strategy in an SC when substitute bundles are sold at the manufacturers' level?…”

Green Investment Decisions and Coordination in a Green Agri-Product Supply Chain considering Risk Aversion and Bargaining Power under Different Channel Power Structures

“…Li et al [39] studied a dynamic price game model in a dual-channel green supply chain and focused on the efect of parameter changes on the pricing strategies and complexity of the dynamic system in a dynamic environment. Zhijian et al [40] examined the joint efect of overconfdence and fairness concern on supply chain decisions and designed a buyback contract to coordinate the supply chain. Zhao et al [41] studied the pricing and coordination of green supply chains under capital constraints.…”