Abstract
Agricultural products are basic needs of human beings, and whether they are cultivated in a green (or organic) manner has direct impact on environment and public health. This research incorporates product freshness and greenness into a two-echelon agricultural product supply chain (APSC). Game theoretic analyses are carried out to examine pricing, freshness, and greenness decisions of the supply chain members with and without cost-sharing for greenness investment. Subsequently, we conduct comparative and sensitivity analyses for these optimal decisions and profits of the APSC members under different cases. Numerical experiment is employed to investigate the impact of key parameters on equilibrium decisions and profitability. Analytical and experimental results show that the cost-sharing contract of greenness investment for agricultural products helps to strengthen the supply chain members’ effort in improving the greenness and freshness levels of the agricultural product, thereby enhancing both individual and channel profitability of the APSC under certain conditions. This research also reveals a widened profit gap between the producer and the retailer under the cost-sharing contract.
Highlights
With continued progress of society and improvement of the standard of living, the public is increasingly concerned with soil degradation and environmental pollution due to extensive use of chemical fertilizers and pesticides in agricultural production. ese environmental issues are known to pose significant threat to public health and have motivated more and more farmers to pursue organic farming and cultivate their agricultural products in a green manner
We first propose a two-echelon agricultural product supply chain (APSC) under the freshness and greenness concerns where the producer is solely responsible for the investment cost in improving the greenness level of the agricultural product and the retailer takes care its fresh-keeping cost. e equilibrium results are obtained for both decentralized and integrated cases under this base model
A cost-sharing contract is proposed to Retail price (P) wholesale price (W) Greenness level (μ)/freshness (θ)
Summary
With continued progress of society and improvement of the standard of living, the public is increasingly concerned with soil degradation and environmental pollution due to extensive use of chemical fertilizers and pesticides in agricultural production. ese environmental issues are known to pose significant threat to public health and have motivated more and more farmers to pursue organic farming and cultivate their agricultural products in a green (or organic) manner. Motivated by [10, 22] and Ghosh and Shah [23, 24], we introduce green (or organic) investment in a fresh APSC and devise a cost-sharing contract to improve the operations of this supply chain system. The two APSC members play a Stackelberg game and the producer is modeled as the leader To make the equilibrium solutions meaningful, we assume that 2bk > τ2, α − bc > 0, and 2bkλ − β2k > λτ
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