Pricing and Coordination Decisions in Fresh Agricultural Product Supply Chain with Government Subsidy

Abstract

To improve the quality of fresh agricultural products, the Chinese government provides financial subsidies to farmers for constructing refrigerated storage facilities. Our study examines a dual-channel fresh agricultural product (FAP) supply chain composed of a farmer and a retailer. Within this framework, we have developed decision models for decentralized and centralized scenarios, compared the optimal solutions with and without government subsidies, and proposed a contract mechanism to coordinate the decentralized supply chain. Our findings indicate that in the decentralized scenario if the cost coefficient for maintaining freshness exceeds a certain threshold, the retailer’s online and offline prices may surpass those in centralized scenarios. Government subsidies not only enhance product freshness but also increase retail prices and overall supply chain profitability. Additionally, the revenue and cost-sharing contract could effectively coordinate the supply chain to achieve optimal performance as seen in centralized scenarios. These insights provide valuable guidance for farmers and retailers making optimal decisions with or without government support.

Keywords

Dual-channel supply chain / fresh agricultural product / government subsidy / supply chain coordination

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Systems Engineering Society of China and Springer-Verlag GmbH Germany