Pricing and Safety Investment Decisions in Food Supply Chains with Government Subsidy

Table 1

Notation and explanation.

Parameters	Definition
	The heterogeneous customer valuation,
	Customers’ perceived quality about food
	The customer utility
	Deterioration coefficient, which is positively correlated with the deterioration rate,
	Nonnegative coefficient representing demand sensitivity to the product’s perceived quality
	The constant production cost per unit
	The risk aversion indicator of the processor
	Cost coefficient of the safety investment
	Fixed proportion of deterioration cost-sharing
Decision variables:
	The marginal profit per unit
	The wholesale price per unit
	The selling price per unit,
	The optimal safety investment
	The government subsidy per unit
Functions:
	The total demand during the whole sales cycle
	The total order quantity during the whole sales cycle. Since the product may undergo deterioration during the process of transportation and sales, to satisfy demands, the retailer will set . To simplify the model, we denote .
	Customer’s surplus, which is a function of government subsidies
	Social welfare, which is a function of government subsidies
	Expected profit of the food processor during the whole sales cycle
	Expected profit of the supplier during the whole sales cycle
	Expected utility of the risk-averse processor during the whole sales cycle