Pay Inequality, Pay Secrecy, and Effort: Theory and Evidence

We study worker and firm behavior in an efficiency-wage environment where co-workers' wages may potentially influence a worker's effort. Theoretically, we show that an increase in workers' responsiveness to co-workers' wages should lead profit-maximizing firms to compress wages under quite general conditions. Our laboratory experiments, on the other hand, show that --while workers' effort choices are highly sensitive to their own wages-- effort is not affected by co-workers' wages. As a consequence, even though firms in our experiment tended to compress wages when wages became public information, this did not raise their profits. Our experimental evidence therefore provides little support for the notion that inter-worker equity concerns can make wage compression, or wage secrecy, a profit-maximizing policy.

Strategic Inventory and Supply Chain Behavior

Based on a serial supply chain model with 2-periods and price-sensitive demand, we present the first experimental test of the effect of strategic inventories on supply chain performance. In theory, if holding costs are low enough, the buyer builds up a strategic inventory (even if no operational reasons for stock-holding exist) to limit the supplier\u27s market power, to increase the own profit share, and to enhance the overall supply chain performance. The supplier anticipates the effect of the strategic inventory and differentiates prices to capture a part of the increased supply chain profits. Our results show that the positive effects of strategic inventories are even more pronounced than theoretically predicted, because strategic inventories empower buyers to reduce payoff inequalities and suppliers exhibit a willingness to reduce inequalities as long as their payoff remains above a certain threshold. Overall, strategic inventories have a double positive effect, a strategic and a behavioral, both reducing the average wholesale prices and damping the double marginalization effect and the latter leading to more equitable payoffs

Research on Cooperative Advertising Decisions in Dual-Channel Supply Chain Under Asymmetric Demand Information When Online Channel Implements Discount Promotion

This paper analyzes the both online-channel price discount and advertising decisions in a dual-channel supply chain involved one manufacturer and one retailer. A Stackelberg game dominated by the manufacturer is established. The influence of asymmetric demand information is analyzed. The study shows that retailer has a motivation to lie about the offline demand information and it always announces a higher advertising impact factor. To induce the retailer to reveal to true demand information, a franchise-fee contract is designed

Dominant Models in a E-supply Chain When Concerning Fairness

Although the development of e-commerce can expand market for manufacturers, it requires more fairness. With the rising of consumers’ awareness, an enterprise who does not concern fairness will loss reputation and customers immediately, especially in e-supply chain system. Based on this great significance, the paper introduces fairness concern into e-supply chain, constructs two dominant models in Stackelberg game and discusses the decision-making processes respectively. Results show that: (1) The profit of network platform increases with the growth of commission, as well as the service level, but the profit of manufacturer decreases. Therefore, manufacturer does not prefer a higher commission when she dominates. (2) In a certain range, the service level and sales price both reach the highest point with a dominant network platform who concerns fairness, at the same time, they have positive correlation with fairness degree. (3) Fairness concern is beneficial for poaching consumers, so dominant enterprises should concern it forwardly even though sacrifice profit

A theoretical perspective on agribusiness and ethics in a South African context

In my presidential address in 2002 I made the point that there is a growing need to make some adaptations to the neo-classical foundations of agricultural economics if we as agricultural economists want to become useful in making a contribution to the empowerment process in agriculture. I expressed the need for much more interaction and engagement with other disciplines in the social sciences if we want to play a significant role in addressing the real challenges facing agriculture in South Africa. Some new values and understanding of the principles of humanity and dignity is urgently needed. The theme of this conference provides an ideal opportunity to take this argument and the case I made for cross-disciplinarity a bit further. Last year I argued that agricultural economists need to utilise the strengths of sociology, anthropology and political analysis in order to be better equipped to tackle the challenge of black empowerment in South African agriculture. This year I will show how we need these disciplines and also philosophy if we want to address ‘ethics’ in business. The point that was made throughout my earlier paper is that economic theory sacrifices far too much relevance in its pursuit of ever-greater rigour. Given the challenges facing the agricultural sector in Africa, we need to see much stronger efforts to integrate the building of theory in economics with the study of reality.Agribusiness,

Game-Theoretic Analysis for a Supply Chain With Distributional and Peer-Induced Fairness Concerned Retailers

In this paper, we consider a supply chain system with one supplier and two homogeneous retailers to investigate the influence of distributional and peer-induced fairness concerns on supply chain. The Nash bargaining solution is used as distributional fairness reference and the first retailer’s monetary payoff is used as the peer-induced fairness reference. We first analyze the decision-making process of the fairness concerned retailers under a given wholesale price and make a comparison with the fairness-neutral counterparts, then we derive the supplier’s optimal wholesale price and the retailers’ corresponding optimal order quantity in equilibrium. The results show that the second retailer orders less product and receives a higher wholesale price than the first retailer. The peer-induced fairness concerned retailer is in a worse position than the distributional fairness concerned retailer

Analysis of the Project Supply Chains: Coordination and Fair Allocation

This research investigates how project contracts can coordinate the supply chain between a project manager and contractor and if the solutions can be ensured as equitable. The main features of this type of supply chain are the trade-offs between the selection of a higher rate of resource consumption with a consequent higher cost to the contractor and a lower rate of resource consumption leading to later delivery and a reduction of the project-reward to the project manager. This broader problem could lead to a coordination problem for the overall supply chain. This research proposed a solution to this broader problem in two different scenarios: Take it or leave it scenario and negotiation scenario. Finally, the fair allocation of the risks and benefits and the related decision-making issues are addressed as one of the behavioural barriers to the supply chain coordination. The coordination issues in a take it or leave it scenario are addressed using time-based and fixed price project contracts using Stackelberg games. Models of coordination were proposed with time-based contracts, but the fixed price contracts failed to coordinate. The coordination problems in negotiation scenario are addressed with the Nash's bargaining, the Kalai Smorodinsky bargaining, and the utilitarian approach. A cost plus contract has been found to dominate the solutions over any cost sharing contract and fixed price contract for Nash's bargaining and Kalai Smorodinsky bargaining cases. Finally, the issues of fairness of allocation of risks and benefits as one of the challenges of supply chain coordination, have been investigated. The fixed price contracts were found to coordinate the supply chain under consideration alongside the time-based contracts if the members had fairness concern. Some of the key features of this research include the incorporation of various probability distributions for the project completion time and cost, the inclusion of various forms of risk preference, and addressing the challenges of fair allocation in project supply chains

Applying Behavioural Economics to International Development Policy

behavioural economics, policy