Cold chain investment and pricing decisions in a fresh food supply chain

Abstract Cold chains play an important role in reducing food spoilage, attracting food safety sensitive consumers, and guaranteeing food safety. Despite these advantages, the implementation of cold chains also calls for massive investment. Considering both costs and benefits of cold chains, our research established an optimization model for a fresh food supply chain to maximize its members' profits. Optimal investment levels of cold chain construction and advertisement, along with optimal pricing, were determined. The analysis shows that collaborative cold chain investment and collaborative pricing are superior strategies for the supply chain. Furthermore, we discuss the role of consumer food safety awareness and observe relatively high levels of cold chain investments and the mutually reinforcing effect of supply chain members' cold chain investments in a food safety sensitive market. Therefore, we suggest that governments should encourage improved food safety awareness among consumers to motivate cold chain investment and thus guarantee food safety.