Does cooperative intervention affect pricing decisions in the agricultural supply chain?

Abstract

In global agricultural markets, farmers often face profit squeezes due to low bargaining power, which affects the sustainability of agriculture and the livelihoods of farmers. Cooperative intervention is seen as a key solution to improve bargaining power and optimize profit distribution in the agricultural supply chain. In this study, a two-stage dynamic game model is adopted to focus on bargaining power and compare the effects of linear pricing versus a double charging system under cooperative intervention. It is found that the cooperative is better when it has full bargaining power or when it faces downstream sellers with comparable bargaining power, and the dual-charging system is more favorable. When cooperatives bargain with sellers, the degree of differentiation of agricultural products affects the cooperatives’ profitability and cooperatives tend to maintain the two-part tariff when the bargaining power is less than a threshold condition containing the degree of differentiation of agricultural products; when discounts exceed the threshold, cooperatives shift to linear pricing to safeguard their profitability. Numerical analysis validates the theory and reveals the changing pattern of cooperative profits under market forces. This study not only provides theoretical support for the study of supply chain pricing strategies under the condition of considering the bargaining power of producers (farmers) but also provides management insights for the stability and sustainable development of agricultural supply chains. Its novel dynamic game framework is cross-culturally applicable to help farmers’ cooperatives cope with the challenge of profit distribution in a global context and emphasizes the importance of differentiation strategies to enhance bargaining power and promote fairness and efficiency in global agricultural supply chains.