Optimizing Produce-Quality Disclosure in Agricultural Supply Chain Systems: Self-Disclosure or Third-Party Disclosure

Many produces (e.g., wine, grain, and apples) are sold in advance. However, quality uncertainty may deter consumers from making early purchases. To address this issue, manufacturers have to adopt a disclosure strategy (self-disclosure (SD) or third-party disclosure (TPD)) to signal quality information. This paper develops models to analyze how to choose a disclosure strategy while considering consumers’ trust in the manufacturer and expected product quality. We characterize the manufacturer’s optimal advance-selling prices, profits, consumer surplus, and social welfare under both strategies. Then, we get the conditions which disclosure the strategy that should be adopted. We find that SD is preferable when quality expectation is low or consumer trust is high, as it leads to larger profit and social welfare. Conversely, TPD proves more beneficial when quality expectation is high but consumer trust is low, although it may reduce consumer surplus and social welfare when trust is low. In addition, we find that high expected production capacity shortage and high TPD cost can make SD more preferable. Consumers’ regret of misjudging quality increases the advantage of TPD, whereas regret of missing out makes SD more attractive. We further consider the cases that the disclosure strategy can act as a quality signal and the spot price is an endogenous decision variable, and we find that the optimal disclosure strategy has a similar structure.