Quality disclosure in agricultural supply chains: farmer versus platform disclosure

Abstract

This paper investigates the firms' equilibrium disclosure strategies in an agricultural supply chain, wherein the farmer sells agricultural products through an intermediary platform to the end market. Both the farmer and the platform privately observe the product quality information and independently determine whether to disclose this information to the consumers. We examine two disclosure formats, farmer disclosure format and platform disclosure format, depending on who is responsible for quality disclosure. Our analysis reveals that the commission rate exerts a nontrivial impact on the farmer's and platform's disclosure incentive and their profits. The farmer has the incentive to disclose the quality information only when the commission rate is low, while the platform chooses to disclose the quality information only when the commission rate is high. Additionally, under farmer (platform) disclosure format, the platform's (farmer's) profit exhibits nonmonotonic pattern with respect to the commission rate when the disclosure cost is low. Moreover, we show that both the farmer and the platform may opt to take the disclosure responsibility by itself, and in certain conditions, their preferences for two disclosure formats could be aligned, resulting in a “win-win” situation for both parties.