Abstract: A two-stage supply chain composed of a supplier and a retailer is considered. A Stackelberg game model is established for such a supply chain by introducing fairness preference under a buy-back contract. Then, by a backward induction method, a research is conducted on how wholesale price is decided, whether buyback contract can achieve coordination, and how fairness preference impacts the wholesale price. Results show that when the retailer and the supplier are playing Stackelberg game, a buyback contract cannot coordinate the supply chain at all whether they consider fairness preference or not. The wholesale price decreases as the retailer’s fairness preference increases, but it increases as the supplier’s fairness preference increases.

Key words: fairness preference, Stackelberg game, buyback contract, supply chain coordination