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Mathematical Problems in Engineering
Volume 2017 (2017), Article ID 7358236, 13 pages
https://doi.org/10.1155/2017/7358236
Research Article

A Bilevel Stochastic Dynamic Programming Model to Assess the Value of Information on Actual Food Quality at Wholesale Markets

1Department of Industrial Engineering, Tsinghua University, Beijing 100084, China
2Operations Research and Logistics, Wageningen University, Hollandseweg 1, 6706 KN Wageningen, Netherlands

Correspondence should be addressed to Xiangyu Hou

Received 13 May 2017; Accepted 13 September 2017; Published 31 October 2017

Academic Editor: Mauro Gaggero

Copyright © 2017 Xiangyu Hou et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

In the fresh produce wholesale market, the market price is determined by the total demand and supply. The price is stochastic, and either wholesaler or retailer has few influence on it. In the wholesaler’s inventory decision, the price’s uncertainty plays an important role as well as the uncertainty from the demand side: the wholesaler makes his decision based on the retailer’s ordering, which is influenced by the stochastic market price and the distribution of the consumer’s demand. In addition, when at the wholesale stage, the products show a similar quality of similar appearance. With more efforts being input, the wholesaler could detect and record more additional information than that reflected from the appearance. Based on this, he can classify the quality into different levels. No experience shows how the wholesaler could use the underlying quality information and how much this information could improve his profit. To describe and explore this problem, a bilevel dynamic programming approach is employed. We evaluate different strategies of using the underlying information, show the features of the optimal policy, develop heuristics, and discuss the influence of factors such as quality and market price. We also develop the managerial principles for the practical use.