Abstract for:Fairness in the Beer Distribution Game

The purpose of this paper is to incorporate fairness measures into a dynamically complex simulation of the Beer Distribution Game. We use system dynamics methodology to study the outcomes of the Fehr and Schmidt (1999) fairness model outside of simple experimental bargaining and market games. We find that all players in the Beer Distribution Game consider their payoffs as less valuable than they really are as the result of inequity aversion. In addition, upstream supply chain tiers suffer significantly more than downstream tiers and, contrary to previous research, it is the wholesaler who suffers the most because of its unique position in the supply chain. This research provides new insights into how the position in the supply chain affects the performance of individual supply chain members and to what degree they perceive this performance as being fair.

Key words: fairness, inequity aversion, beer game

Word count: 7285