Price and cold-chain service decisions versus integration in a fresh agri-product supply chain with competing retailers

Abstract

This paper studies the price and cold-chain service decisions of a fresh agri-product supply chain with competing retailers and explores the impacts of (horizontal/vertical) integration on the decisions and profits. When the cold-chain service price is exogenous, we find that vertical integration is more effective to decrease quantity/quality loss of agri-products; the third-party logistics provider is better off with vertical integration while horizontal integration hurts both the third-party logistics provider and the supplier. We identify the conditions under which a retailer benefits from vertical or horizontal integration. Whether horizontal integration can improve the retailer’s profit depends on product substitutability. The profit of a retailer can be enhanced by vertical integration between the other retailer and the supplier if product substitutability is low. The endogenization of the cold-chain service price does not change the main results qualitatively.