Two‐stage pricing of perishable food supply chain with quality‐keeping and waste reduction efforts

Abstract

AbstractThis research investigates quality‐based optimal pricing decisions of a supplier and a retailer in vertical Nash and Stackelberg games, where the game scenarios include with and without markdown pricing scenarios. Particularly, delivery lead time is formulated as a decision on quality‐keeping effort, and the cost of food wastage resulting from unsold food is estimated. We found that the two‐stage pricing model leads to lower food waste and better profit payoffs for both players than the single‐stage model. Results also show that with limited market power, the retailer may sacrifice its sales margin under the Stackelberg game.