Reselling or Agency Selling? the Optimal Pricing and Return Strategy for the Agricultural Product

Abstract

An increasing number of farmer cooperatives turn to sell their agricultural products through the e-commerce platform. Two sales modes are investigated: the reselling mode and the agency selling mode. In the former mode, the cooperative charges the platform a wholesale price and the platform sets the retail price and the return compensation. In the latter mode, the cooperative decides the retail price and the return compensation on his own but needs to share a proportion of his revenue to the platform. We analyze the optimal pricing and return decisions in these two modes, and the results are shown as follows: (1) In the reselling mode, the wholesale price is linearly increasing in the surviving rate, whereas both the retail price and the return compensation are independent of the surviving rate. (2) In the agency selling mode, the retail price and the return compensation are increasing in the surviving rate and decreasing in the revenue sharing proportion. (3) The retail price (demand) in the agency mode is higher (lower) than that in the reselling mode. There exists a Pareto improvement region wherein both firms prefer the agency selling mode to the reselling mode. (4) The cooperative prefers the agency mode to the reselling mode in a market with high surviving rate and low revenue sharing proportion.