The coordination problem of fresh agricultural products supply chain with option contract based on product quality

Abstract

The paper investigates a two-echelon fresh agricultural products supply chain(FAPSC) consisting of a supplier and a retailer in which the demand of the retailer is both price and quality sensitive. The wholesale price contract and the option contract based on fresh agricultural products quality is researched. The optimal decisions of the FAPSC with and without option contract are analyzed. The result shows that the retailer orders more in the FAPSC with option contract compared to that without option contract. The supplier also has incentives to improve the quality of the fresh agricultural products when the option contract is adopted. The profits of the supplier and the retailer in the FAPSC with option contract are also more than that in the FAPSC without option contract. At last, extensive numerical experiments are conducted to verify the behaviors of the FAPSC members.