An Improved Revenue Distribution Model for Logistics Service Supply Chain Considering Fairness Preference

Abstract

Revenue distribution is an important issue in the operations of a logistics service supply chain (LSSC). The existing works on revenue distribution are mostly based on the assumption of rational economic people that are purely self-interested. However, people also have a fairness preference, which impacts people’s decision-making behavior or even the success operations of the LSSC. For a two-level supply chain consisting of logistics service integrator (LSI) and several functional logistics service providers (FLSP), this paper establishes an improved revenue distribution model considering FLSPs’ inequity aversion. Specifically, the BO model (abbreviation of a model proposed by Bolton and Ockenfels in 2000) is improved to describe the FLSPs’ inequity aversion, which is combined into the conventional revenue distribution model. The proposed model aims to maximize the revenue of logistics service supply chain and obtains the best revenue distribution ratio of each member under equilibrium. In the numerical cases, the impacts of inequity aversion and the number of members with inequity aversion on the revenue distribution are discussed, respectively. The results show that a higher degree of FLSP’s advantageous inequity aversion corresponds to a lower revenue distribution ratio; a higher degree of FLSP’s disadvantageous inequity aversion corresponds to a higher revenue distribution ratio. Increasing the number of FLSP members with inequity aversion results in a higher profit of LSI and lower total utility of FLSPs and the utility of the supply chain. The more FLSP members with inequity aversion there are, the higher the LSI’s profit is, and the lower the total utility of FLSPs and the utility of supply chain are. In addition, the revenue distribution ratio of the FLSP increases with its relative fairness revenue coefficient among FLSPs.

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