Supply Chain Contract Incorporating Fairness under Asymmetric Information

This paper obtains optimal settings of each parameter on a supply chain composed of a rational manufacturer and a fair retailer. Through the establishment of model under information symmetry and information asymmetry, in which the effort level of retailer can’t be observed by manufacturer, the impact of retailer’s fairness on his effort level and manufacturer’s utility are explored and investigated. From the comparison, this paper find that retailer’s effort level and manufacturer’s utility under information asymmetry are higher than those under information symmetry, and the difference is directly proportional to the degree of retailer’s fairness. Retailer’s fairness has positive effect on his effort level and manufacture’s utility under information asymmetry, and manufacturers tend to cooperate with the retailer who has higher degree of fairness.