Time Strategy for Setting Direct and Wholesale Prices with Intermediaries in Dual-channel Supply Chain of Seasonal Agricultural Products

Abstract

This research studies the pricing and timing strategies of seasonal agricultural products in a dual-channel supply chain, which consists of two trading channels: direct channel and retail channel, by applying the conceptual principles of game theory and optimal value problems. The main purpose of this research is to determine when farmers should bring their products to the market in a direct
channel and what the most suitable price for that product should be. To get the most benefit, a farmer has to set a direct price together with selling agricultural products to the intermediary. In terms of price, the direct price in front of the plantation should be set higher than the expected purchase price offered by the intermediary and lower than the retail price. That is because if the farmers set the direct price lower than the expected purchase price, it will make them lose their income from the direct channel. On the other hand, if the direct price is set higher than the retail price through the retail channel, it will result in a lack of incentives for consumers to purchase through direct channels. The results are presented as an equation. The values to be substituted can be based on historical
statistics or a similar product. At the end of this paper, results show what would occur on the farmers’ income when carrying out this pricing and timing strategy.