Pricing and cold-chain service level decisions in a fresh agri-products supply chain with logistics outsourcing

Abstract

This paper develops two Stackelberg game models to investigate the pricing and service level decisions of a fresh agri-products supply chain consisting of one supplier, one retailer, and one third-party logistics provider and examines the impacts of channel leadership on the price and service level decisions and profits. We consider two game scenarios: the logistics provider-first scenario and the supplier-first scenario. When the cold-chain service price is exogenous, we find that when the service sensitivity is sufficiently low, each player can obtain a higher profit under the logistics provider-first scenario than under the supplier-first scenario. Counter-intuitively, for the supplier, channel leadership does not guarantee it a higher profit. When the cold-chain service price is endogenous, we find that although the relative magnitude of the supplier’s and retailer’s profits is changed under the supplier-first scenario, the other main results are unchanged qualitatively.