Research On Pricing Strategy Of Agricultural Products Supply Chain Considering Substitution Effect

The basic direction for agricultural and rural economic development in the new period is to realize the industrialization of agriculture.Compared to the traditional agriculture that produces and sells one kind of agricultural products,industrialization of agriculture requires large-scale production and sale of a variety of agricultural products.In addition,the agricultural products produced usually have a certain degree of substitution among each other.For example,the farmers usually produce the fruits that can be substituted with each other,like apples and pears.These changes,caused by the industrialization of agriculture,have made the production and sale of agricultural products a complex decision problem.How should farmers and retailers optimize pricing decisions in the supply chain of multiple agricultural products?How does the products' substitution quality affect the pricing decisions of farmers and retailers?Do different retailer selection strategies affect the farmer's profit?These questions need to be solved urgently.Based on the Stackelberg game model,this paper analyzes the problem of selecting downstream retailers for a fruit-producer who produces two kinds of fruits with partial substitutability under joint-pricing strategy.There are two schemes for a fruit-producer to wholesale its substitutable fruits:the first is to wholesale both fruits to the same retailer,the second to wholesale them to different retailers separately.First,a Stackelberg game model is developed between the fruit producer and two retailers,and optimal equilibrium solutions are obtained under two schemes.Then,a comparison is made based on the obtained solutions.Furthermore,numerical experiments are conducted to illustrate influence of fruits substitution rate on the optimal solutions.Finally,an asymmetric situation is discussed,where wholesale prices of two retailers are opaque to each other.Results show that:the fruit-producer's decisions of wholesale price remain the same in both schemes,while the retailers reduce their markup rates in the second scenario,which increases the total demand of the retail market and further stimulates the fruit-producer' investment,leading to an improvement in the fruit-producer's profit.Numerical results show that as substitution rate of two fruits increases,the fruit producer will increase its wholesale prices to stimulate consumption,leading to an increase of markup rates in the first scenario.However,when there are two retailers selling substitutable fruits,an increase in substitution rate means more fierce competition between two retailers.Hence,markup rates decrease in the second scenario as a result of price competition.Finally,the results also show that the information asymmetry situation do not affect the farmers' downstream retailer selection.