Pricing decisions of organic and conventional products in a dual-channel competitive food supply chain

This paper presents a pricing decision problem for organic and conventional agricultural products in a food supply chain. This study addresses two general selling channel structures. In the first channel format, both organic and non-organic types of single food agricultural products are offered by an agri-food retailer. In the second channel format, we consider a dual channel agri-food supply chain wherein two selling channels, a retail store and an online selling channel, offer organic and non-organic foods at different prices. This study focuses on designing different distribution channel structures and highlighting their effect on the optimal decisions. The direct selling channel model, centralized dual-channel model, decentralized leader-follower dual-channel model, and coordinated dual-channel with the revenue-sharing contract are designed to analyze the optimal pricing solutions. Several sensitivity analyses are conducted, and different structures are compared. The results reveal that by increasing the compatibility of the product with online marketing, wholesale prices of both organic and conventional products increase. Furthermore, results indicate that the coordinated system suggests higher profits for the retailer, the online store, and the total supply chain compared to other structures. Finally, results drawn from analysis with respect to different parameters are discussed.

Automated summary

This study examines the pricing decision problem for organic and conventional agricultural products in a food supply chain, focusing on different selling channel structures. The results show that the coordinated dual-channel structure leads to higher profits for the retailer, the online store, and the total supply chain.