Behavior-Based Pricing of Organic and Conventional Agricultural Products Based on Green Subsidies

Kanying Liu, Yong Lan, Wei Li and Erbao Cao
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Kanying Liu: School of Economics & Trade, Hunan University, Changsha 410006, China
Yong Lan: School of Business, Hunan Agriculture University, Changsha 410128, China
Wei Li: School of Economics & Trade, Hunan University, Changsha 410006, China
Erbao Cao: School of Economics & Trade, Hunan University, Changsha 410006, China

Sustainability, 2019, vol. 11, issue 4, 1-16

Abstract: This study considers two types of consumers: those without preference difference, and those that prefer organic agricultural products. It constructs two two-stage hoteling behavior-based pricing models and solves for the optimal loyalty price and poaching price of the two types of enterprises. It analyzes the influence of subsidies on the pricing of the two types of products and corporate profits. The study also undertakes numerical simulation for further analysis, finding that green subsidies are negatively correlated with the loyalty price and poaching price of organic agricultural products, but that they will not affect the difference between the two types of prices. When the inherited market of organic agricultural products is dominant, the size of green subsidy affects the relationship between the prices of the two types of products. However, when organic agricultural products do not dominate the initial market, green subsidies do not affect the size of the relationship between the two prices of the two types of products. When the initial market position of organic agricultural products is different, the types of competing customers are different between the two types of enterprises, and the intensity of competition will increase with the increase of subsidies. Green subsidies increase the profits of organic agricultural enterprises and reduce the profits of conventional agricultural enterprises.

Keywords: green subsidies; organic agricultural products; behavior-based pricing; consumer share without preference difference (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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