Abstract
Quality emerges as a pivotal competitive factor for agricultural products. Recently, retailers within agricultural supply chains have begun investing in technologies to improve quality and designing contracts to incentivize farmers to enhance their labor inputs. The farmers and the retailers incur different quality investment costs, with this cost increasing in the quality they provide. Simultaneously, retailers have embraced the farmer-competition strategy, employing competition to stimulate improved agricultural product quality among farmers. We construct a Stackelberg game model to analyze how farmers’ quality investment, retailer’s contract design, and profits are affected by the retailer’s farmer-competition strategy. We show that the farmer competition introduced by the retailer is not always effective in improving the farmer’s quality investment. Similarly, the competition cannot always lead to additional profits for the retailer. Moreover, the supply chain profit suffers from the retailer’s farmer-competition strategy when the competition intensity between farmers is relatively large. Our results offer insights for retailers by identifying how should the retailer design the contract to improve the farmer’s quality effort given the existence of the farmer competition and under what conditions the retailer should adopt the farmer-competition strategy.
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Acknowledgments
This study was funded by National Natural Science Foundation of China under Grant Nos. 72192823 and 71821002. The authors thank Executive Editor Yongbo Xiao, and two anonymous reviewers.
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Weihua Zhou is an editorial board member for the Journal of Systems Science and Systems Engineering and was not involved in the editorial review, or the decision to publish this article. All authors declare that there are no other competing interests.
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Jinxin Yang is a Ph.D. candidate in the School of Management at Zhejiang University. Her research interests include quality management, operations in agricultural supply chains, and on-demand economy.
Dongmei Xue is a lecturer at Alibaba Business School, Hangzhou Normal University. She received a Bachelor’s degree in logistic management in 2014 and a Ph.D. degree in management science and engineering from Zhejiang University in 2020. Her current research is focused on green supply chain management, online businesses operational management, and marketing-operations interface.
Weihua Zhou holds the esteemed Qiushi Distinguished Professorship and serves as the director of the International Research Center for Data Analysis and Management at the School of Management, Zhejiang University. He received his Bachelor’s and Master’s degrees from Zhejiang University in 1999 and 2002, respectively, and received his Ph.D. degree from Hong Kong University of Science and Technology in 2007. His research interests include logistics and supply chain management and supply chain finance. He has published peer-reviewed articles in highly ranked journals such as Management Science, Operations Research, Production and Operations Management, European Journal of Operational Research, Omega, International Journal of Production Economics, etc.
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Yang, J., Xue, D. & Zhou, W. Quality Improvement through Contract Design and Competition in Agricultural Suppply Chains. J. Syst. Sci. Syst. Eng. (2024). https://doi.org/10.1007/s11518-024-5605-0
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DOI: https://doi.org/10.1007/s11518-024-5605-0