Contract selection for fresh produce suppliers cooperating with a platform under a markdown-pricing policy

Since some platforms such as Amazon, and JD.com are expanding their business into the fresh produce market, traditional fresh produce suppliers are seeking to cooperate with them. However, markdown-pricing policies caused by the interaction between the time-varying quality of fresh produce and the time-varying price strongly influence the choice of the cooperation mode in current research. A wholesale price contract (WPC) and a consignment revenue-sharing contract (CRSC) are two common modes for cooperation between the fresh produce supplier and the platform. Accordingly, the markdown-pricing policies for fresh produce under these two contracts are analysed. The impacts of the deterioration rate and the price markdown time on profit and the pricing of the supplier and the platform are also discussed. Finally, the contracting strategy of the supplier and the contracting preference of the platform are examined. The results show that a CRSC is always beneficial for the supplier but not for the platform: if the price-sensitivity increase in the second period is small, then the platform is worse off under a CRSC when the price markdown time is moderate or the market size is small. However, the platform prefers a CRSC due to the high deterioration rate of fresh produce.

Automated summary

This study analyzes the markdown-pricing policies of two common cooperation modes between fresh produce suppliers and platforms. The results show that a consignment revenue-sharing contract (CRSC) is beneficial for the supplier but not for the platform, and the platform prefers CRSC due to the high deterioration rate of fresh produce.