Tracing or not: How can the supplier of geographical indication products benefit from different traceability strategies?

Abstract

Geographical Indication (GI) products are known for their unique product qualities and good reputations. However, there are many deceptive products on the market that diminish consumers’ enthusiasm for making purchases. To alleviate consumers’ concerns, a trustworthy and reliable traceability certification is needed. The issue of how to implement traceability strategies in the supply chain deserves attention, based on consumer preferences for traceability and their independent channel choice. In this paper, we construct a secondary supply chain consisting of suppliers and retailers and study the optimal prices and traceability strategy of the supply chain under three channel structures, considering consumer preferences for traceability and their independent channel choice. By comparing the optimal profits of the supplier and the retailer under different channels, we obtain the conditions for implementing the traceability strategy and the specific traceability levels. To be more realistic, this paper also considers the effect of market power on the initial model. We compare the Pareto optimization regions under different scenarios. The results show that the implementation of traceability is conditional and that consumer traceability preferences, traceability costs, and channel substitutability are closely related. In some scenarios, either the bargaining game or the Stackelberg game can achieve Pareto optimization.