Combating unethical producer behavior: The value of traceability in produce supply chains

With produce's perishability and quality heterogeneity, unethical producers may claim false quality of their products in non-traceable produce supply chains (PSCs) to increase their orders and prices. The latest traceability technology, such as blockchain, offers a promising solution to circumvent this problem as it enables incorruptible visibility throughout the chain. In this paper, we develop a game theoretical model to explore the traceability value of combating unethical producer behavior in PSCs. We consider a PSC with heterogeneous producers (with different quality) and retailers (with different quality-price-ratio (QPR) preferences) under two scenarios: a non-traceable PSC (NPSC) and a traceable PSC (TPSC). Our results suggest that lacking traceability in a PSC will cause adverse selection, i.e., the producers will adopt symmetric quality claim and wholesale price decisions in NPSC. In TPSC, traceability enables the high-quality producers to enjoy higher wholesale prices and, in the meantime, higher market shares than the low-quality ones. Consequently, traceability can benefit the high-quality producers in most cases. However, the retailers cannot benefit from traceability because it reduces competition on the supply side and enables the high-quality producers to exploit their purchase power by strategically differentiating the QPRs of their products. Observing that traceability only benefits one stakeholder, we propose an incentive scheme to coordinate the chain and identify the conditions under which the high-quality producers will voluntarily share their real quality information to achieve a win-win situation with the retailers. Overall, traceability and the proposed incentive scheme can add value to a PSC when there are a small number of producers selling high-quality products on it. Finally, we extend our base model to analyze the impacts of consumers' quality consciousness, producers' ethics levels, and products' in-transit spoilage conditions on the traceability value in PSCs.