Disposable or reusable? Packaging strategy and pricing decision for fresh food considering environmental policies

Abstract

Packaging has become an important concern of fresh food supply chains and will exert a growing influence under environmental policies. In this paper, we have discussed three specific issues to investigate fresh food supply chains’ packaging strategy, that is, whether to use disposable packaging containers (DPCs) or reusable packaging containers (RPCs), whether to purchase or rent RPCs, and the influences of environmental policies. Our research has generated some key findings. First, we find that penalty (such as taxes) and reward (such as subsidies) are simultaneously needed to motivate supply chains to choose RPCs. In terms of the “purchasing or renting” choice, it highly depends on the relative magnitude of the purchase and rental subsidies, along with the number of uses of RPCs and the perishability of fresh food. We also conclude that reusing RPCs for more times has two‐sided effects, that is, the effect of cost saving and the effect of accelerated deterioration. Thus, it is not recommended to excessively reuse RPCs. In addition, we make two extensions. First, we consider endogenous tax rate and subsidy rates and discuss from the perspective of social welfare. Second, we consider endogenous sales price and rental price of RPCs and study the optimal decisions of the RPC operator. Results show that the government should establish a classified tax and subsidy system for packaging containers, and meanwhile benchmarking prices for RPC services should be set to curb the RPC operator's free‐riding behavior.

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