In the Game of Business, Playing Fair Can Actually Lead to Greater Profits

In the Game of Business, Playing Fair Can Actually Lead to Greater Profits

Published: March 13, 2008 in Knowledge@Wharton

Tune into "The Apprentice," and you get an all-too-common view of business. Every week, all of the wannabe moguls try to impress Donald Trump by preening, cajoling and conniving. In this world, toughness is the measure of every CEO, and the boss glories in firing people and squeezing every penny out of suppliers.

Yet according to John Zhang and Jagmohan Raju, both Wharton marketing professors, and Tony Haitao Cui, a University of Minnesota marketing and logistics professor, many people aren't purely mercenary in their business dealings. They care about fairness -- and they should, the researchers say, because doing so can maximize their profits.

A manufacturer and a retailer can both end up making more money if they are fair minded, setting prices with an eye to achieving an equitable outcome in their joint marketing channel as opposed to merely maximizing their individual profits, Zhang, Raju and Cui argue in a paper recently published in Management Science titled, "Fairness and Channel Coordination."

Read the complete article here http://knowledge.wharton.upenn.edu/article.cfm?articleid=1916