Decision-making of fresh agricultural product supply chain considering the manufacturer’s fairness concerns

• Published in: 4OR Vol. 18; no. 1; pp. 91 - 122
• Main Authors: Yan, Bo, Wu, Jiwen, Jin, Zijie, He, Shiyou
• Format: Journal Article
• Language: English
• Published: Berlin/Heidelberg Springer Berlin Heidelberg 01.03.2020; Springer Nature B.V
• Subjects: Agricultural commodities; Business and Management; Decision making; Economic models; Freshness; Industrial and Production Engineering; Markets; Operations research; Operations Research/Decision Theory; Optimization; Pareto optimum; Research Paper; Supply chains; Manufacturer’s fairness concerns; Revenue sharing contract; 91B16; Level of freshness-keeping effort; 90B50; Fresh agricultural products; Pareto improvement
• ISSN: 1619-4500; 1614-2411
• DOI: 10.1007/s10288-019-00409-x

By considering the characteristics of fresh agricultural products, this article introduces the behavioral tendency of fairness concerns of manufacturer to examine the fresh agricultural product supply chain and the optimal decision-making problem. The effects of the manufacturer’s behavioral tendency of fairness concerns on the fresh agricultural product supply chain is analyzed within the traditional and Nash bargaining frameworks, respectively. Results indicate that the manufacturer’s behavioral tendencies can reduce the freshness-keeping effort, the freshness of the produce, and the market demand of fresh agricultural products. The optimal wholesale price and retail price also increase or decrease to meet the manufacturer’s fairness concerns. These are determined by the price elasticity and the level of fairness concern, along with the fairness concern condition. Whether within the traditional or Nash bargaining fairness concern framework, market demand declines significantly with the increase in the level of fairness concern, thereby leading to the reduction of the utility of retailer in the supply chain. Therefore, the revenue sharing contract is introduced to achieve the Pareto improvement of both the manufacturer and the retailer.