Organic Food Labeling and Advertising: A Tripartite Game Model between One Supplier and Two Heterogeneous Manufacturers

Abstract

The development of the organic food industry is of great significance to the environment and society as consumers increasingly prefer green and healthy food. However, certain production and investment problems must be solved. A tripartite game model is established in this study to investigate the labeling and advertising investment decisions in an organic food supply chain composed of one supplier and two heterogeneous manufacturers by the biform game approach. In addition, a subsidy mechanism is introduced to alleviate underinvestment. The results show that, first, the supplier will label if labeling cost is relatively low without considering advertising investment. Second, the supplier will not label if advertising investment is considered because of the "diffusion of responsibility" mentality, and both manufacturers will invest in advertising as a result of equilibrium in dominant strategies. Third, the advertising subsidy mechanism can achieve Pareto improvement and coordinate the supply chain. Finally, manufacturer heterogeneity will lead to differentiated subsidy strategies that the supplier can claim to give additional subsidies to the weak manufacturer, thereby weakening the "diffusion of responsibility" mentality.