Two-Stage Decision Model of Fresh Agricultural Products Supply Chain Based on Option Contract

In this paper, we study a two-stage fresh agricultural products supply chain consisting of a producer and a retailer. Fresh agricultural products are prone to quality and quantity loss, so the retailer needs to exert freshness-keeping effort to reduce loss. Since the product’s freshness and pricing will affect the market demand, we assume that the pricing of fresh agricultural products follows a two-stage decision, and the price is reduced after the freshness decreases. We compare two-stage decision models under three scenarios: centralized, decentralized, and option contracts to explore the impact of freshness-keeping effort on the supply chain and the coordination effect of option contracts on the supply chain. The results show a critical value of freshness-keeping effort under different decision scenarios. The retailer’s profit is directly proportional to the freshness-keeping effort when it is less than the critical value. When it exceeds the critical value, retailer profit is inversely proportional to the freshness-keeping effort. Introducing option contracts can increase the total order quantity, reduce the selling price, and increase the supply chain profit. When the freshness-keeping effort satisfies specific conditions, the total profit under the option contract is equal to the total profit under the centralized decision, and perfect supply chain coordination can be achieved. Finally, the theoretical reasoning and conclusions of the model are verified by numerical simulation, and the influence of freshness-keeping effort on supply chain decision-making and coordination effect is analyzed.