Certify or not? An analysis of organic food supply chain with competing suppliers

Yanan Yu, Yong He (), Xuan Zhao and Li Zhou
Additional contact information
Yanan Yu: Southeast University
Yong He: Southeast University
Xuan Zhao: Wilfrid Laurier University
Li Zhou: University of Greenwich

Annals of Operations Research, 2022, vol. 314, issue 2, No 15, 645-675

Abstract: Abstract Customers expect companies to provide clear health-related information for the products they purchase in a big data environment. Organic food is data-enabled with the organic label, but the certification cost discourages small-scale suppliers from certifying their product. This lack of a label means that product that satisfies the organic standard is regarded as conventional product. By considering the trade-off between the profit gained from organic label and additional costs of certification, this paper investigates an organic food supply chain where a leading retailer procures from two suppliers with different brands. Customers care about both the brand-value and quality (more specifically, if food is organic or not) when purchasing the product. We explore the organic certification and wholesale pricing strategies for suppliers, and the supplier selection and retail pricing strategies for the retailer. We find that when two suppliers adopt asymmetric certification strategy, the retailer tends to procure the product with organic label. The supplier without a brand name can compensate with organic certification, which leads to more profits than the branded rival. As the risk of being abandoned by the retailer increases, the supplier without a brand name is more eager than the rival to obtain the organic label. If both suppliers certify the product, however, they will fall into a prisoner’s dilemma under situation with low health utility from organic label and high certification cost.

Keywords: Organic certification; Pricing; Competing suppliers; Food supply chain (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s10479-019-03465-y Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:annopr:v:314:y:2022:i:2:d:10.1007_s10479-019-03465-y

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/10479

DOI: 10.1007/s10479-019-03465-y

Access Statistics for this article

Annals of Operations Research is currently edited by Endre Boros

More articles in Annals of Operations Research from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().