Optimal pricing strategy for the perishable food supply chain

Abstract

This research investigates the optimal pricing strategy for the perishable food supply chain. Using the setting of a two-echelon supply chain including a supplier and a retailer, we apply the game theory approach to derive the equilibriums for both a single pricing strategy and a two-stage pricing strategy. Through a comparison of the equilibriums, we explore how the two pricing strategies affect the supply chain’s decisions and supplier’s and retailer’s performance individually and collectively. The results of the analysis show that the optimal choice of pricing strategy depends on the price markdown cost and its relationship with the two critical thresholds that are determined by a combination of factors including the potential market size, the price and quality sensitivity factors, the initial quality, the unit product cost, and the quality deterioration rate.

Keywords:

• perishable food
• pricing strategy
• supply chain coordination
• supply chain management

Acknowledgments

This research is partially supported by the National Natural Science Foundation of China (No. 71272128, 71432003, 91646109).

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This research is partially supported by the National Natural Science Foundation of China [grant number 71272128, 71432003, 91646109].