Perishable food supply chain contract with asymmetric freshness information

Abstract

Food suppliers and retailers are grappling with challenging pricing and operational policies due to the deterioration of product quality over time. This problem is exacerbated by the food supplier’s intentions to provide false information about the freshness of the food. A principal-agent model optimisation for food retailer pricing is constructed to anticipate asymmetric freshness information from the food supplier. This study introduces novel modelling by incorporating a quality deterioration function with information asymmetry in case the food supplier attempts to conceal information about the freshness of the food. Retailers should charge non-discriminatory and low wholesale prices to encourage food suppliers to report their less fresh food. Overall, the supplier’s benefits are decreased when they decide not to share information regarding food freshness. However, the supplier remains profitable when the retailer believes in the less fresh food condition based on the contract design.

KEYWORDS:

• Asymmetric information
• perishable food
• pricing decision
• principal-agent model
• quality-based pricing

Acknowledgments

The authors gives their appreciations for Marchiella Widjaja for her assistance in revising the manuscript.

Data availability statement

Data sharing not applicable – no new data generated.

Disclosure statement

No potential conflict of interest was reported by the author(s).