Strategy Optimization of Quality Improvement and Price Subsidy of Agri-Foods Supply Chain.

Abstract

Based on the realistic concerns about the improvement of the quality of agricultural foods (agri-foods), the optimal supply quality and price subsidy strategies of producers and sellers for the two-level agricultural supply chain, composed of a producer and a seller, are studied. The differences in the quality safety, price, and market demand of agri-foods in the supply chain are compared and analyzed. The study found that the maximum profit of supply chain participants decreases with the increase of price elasticity of demand. When the quality of agri-foods is upgraded in a producer-led manner, the quality of agri-foods in the supply chain does not undergo substantial improvement, and the maximum profit of agri-foods operators is insensitive to the price elasticity of demand at this time. When the seller-led quality upgrading is launched, the maximum profit of the producer decreases with the increase of the quality elasticity of demand, the maximum profit of the seller increases with the increase of the quality elasticity of demand, and the total profit of the supply chain also increases with the increase of the quality elasticity of demand under the centralized decision situation. The quality and safety of agri-foods as well as the overall profit of the supply chain can be improved most effectively under the centralized control decision with the goal of maximizing the supply chain benefits. In terms of quality and price, quality improvement actions of agri-foods driven by supply-side producers are less effective than those driven by demand-side consumption. In addition, cost-sharing contracts can significantly improve the quality of agri-foods in the supply chain and make them more “high-quality and low-price” than before the adoption of cost-sharing contracts.