Pricing and cold-chain service level decisions in a fresh agri-products supply chain with logistics outsourcing

- Consider an agri-product supply chain with logistics outsourcing, facing quantity/quality loss.
- We study and compare price and service decisions and profits under two channel leadership scenarios.
- Service sensitivity changes the effect of channel leadership on the cold-chain service level.
- The logistics provider-first scenario is beneficial to all players for low service sensitivity.
- Endogenization of service price may change the relative profit of the supplier to the retailer.

This paper develops two Stackelberg game models to investigate the pricing and service level decisions of a fresh agri-products supply chain consisting of one supplier, one retailer, and one third-party logistics provider and examines the impacts of channel leadership on the price and service level decisions and profits. We consider two game scenarios: the logistics provider-first scenario and the supplier-first scenario. When the cold-chain service price is exogenous, we find that when the service sensitivity is sufficiently low, each player can obtain a higher profit under the logistics provider-first scenario than under the supplier-first scenario. Counter-intuitively, for the supplier, channel leadership does not guarantee it a higher profit. When the cold-chain service price is endogenous, we find that although the relative magnitude of the supplier's and retailer's profits is changed under the supplier-first scenario, the other main results are unchanged qualitatively.