Effects of shared farms on the agricultural supply chain

This paper examines sharing platform in the agricultural supply chain that serves as a direct link between farmers and consumers. We analyze the competition between the sharing platform and the retailer when they face two types of consumers (switchers and retailer-loyal consumers) based on whether they are loyal to the retailer. We investigate how the number of switchers and farmers’ marginal costs affect the retailer’s optimal pricing and profit. We first analyze the case of the sharing platform being a non-profit organization, where farmers pay no fee to use the platform. Our analysis reveals several interesting findings. First, the presence of the non-profit sharing platform will induce the retailer to reduce its equilibrium retail price, making it worse off; both consumers and farmers will become better off. Second, with more switchers in the market, the retailer will decrease its equilibrium retail price; the platform’s equilibrium market-clearing price may increase or decrease. Moreover, farmers’ marginal costs for high-type products have nonmonotonic effects on the firms’ equilibrium prices. In an extension, we consider a for-profit platform, who charges farmers a percentage fee for sales. We find that a higher percentage fee by the for-profit sharing platform may reduce its profit.