ESTABLISHING FOOD TRACEABILITY SYSTEM

BASED ON GAME THEORY

From the Perspective of Retailers

Wei Jin-shi and Lan Hong-jie

School of Economics and Management, Beijing Jiaotong University, Haidian District, 100044 Beijing, China

Keywords: Traceability system, Food supply chain, Game theory.

Abstract: Retail terminal is a weak link of the whole food supply chain in establishing the food traceability system,

and also a key link in realizing traceability food value. This paper firstly analyzes the influence factors of

retails adopting food traceability technology, then makes a game model to analyze three situations: non-

government subsidy; the same government subsidy for adopting the traceability technology and higher

subsidy for who adopts the system first. According to the analysis, the conclusion is drawn: it is unrealistic

to ask all of retails to adopt food traceability technology; corresponding policy should be made to inspire a

part of retails adopting the system first.

1 INTRODUCTION

The traceability system was first used in product

recall system of industrial product such as

automobiles or planes, and later was applied to food

safety control, as food issues become increasingly

important. To the relatively new food traceability

system, many domestic and foreign scholars have

carried on massive basic researches.

The European commission (EC178/2002) defines

food traceability as traceability or retroactive ability

to food, feed, edible animals and all matter that

might be composition of food or feed, in each link of

production, processing and sales. International food

Codex Alimentary Commission (CAC) and

International Organization for Standardization (ISO)

defines traceability as the ability to track the history,

use or position of commodities or behaviour,

through the registered identification number. Fang

Yan et al. (2005)

define food traceability system as

continuity security system of information flow on

each food supply stage.

To the features of traceability system, domestic

and foreign scholars have also done a lot of research

work. Danish scholar Moe T. (1998)

thinks the

traceability system consists of products and

production activities. According to the scope of

implementation, it can be divided into the

traceability system between enterprises and the

traceability system within enterprise. American

scholar Elise Golan (2004)

thinks traceability system

refers to the record system of tracking a product or

product characteristics in entire process or supply

chain system, and set three standards to measure the

traceability system, according to the difference of

traceability system characteristics: breadth, depth,

precision. Shi Yan-tao (2006)

thinks food

traceability product also has positive externality and

network economy features.

At present, scholars’ researches on the

traceability system are mainly aimed at the whole

supply chain or production and processing links on

supply chain, but there is few researches aimed at

the retail enterprises on the end of supply chain.

Chen Hong-hua etc(2009) analyzes the retailers’ role

and status, from the angle of supply chain, and puts

forward related suggestions of retailers' role and the

measures should be taken to establish China's

agricultural product traceability system. On this

basis, this paper studies the factors that influence

retail enterprises on traceability system implement,

and establishes game model to quantitatively

analyze the timeliness of the traceability system.

368

Hong-jie L. and Jin-shi W..

ESTABLISHING FOOD TRACEABILITY SYSTEM BASED ON GAME THEORY - From the Perspective of Retailers.

DOI: 10.5220/0003585003680372

In Proceedings of the 13th International Conference on Enterprise Information Systems (SSSCM-2011), pages 368-372

ISBN: 978-989-8425-54-6

 2011 SCITEPRESS (Science and Technology Publications, Lda.)

2 THE PRESENT SITUATION

OF RETAILERS ADOPTING

THE FOOD TRACEABILITY

TECHNOLOGY

Retail enterprises are at the end of the entire supply

chain, contacting with the production, processing

and consumers, and are main route and channel for

consumers to find traceability information of

products, playing an important role as a bridge in

entire food traceability system. In addition, retail

enterprises take a increasingly dominant position in

the entire supply chain, and play a more and more

predominant role in the supply chain. Therefore,

retail enterprises implementing the traceability

technology could further promote the establishment

of the whole supply chain food traceability system.

2.1 Analyzing the Present Situation

of Retailers adopting the Food

Traceability Technology in Our

Country

At present, a few retail enterprises have equipped

with food traceability information query system, but

overall implementation condition is not ideal.

During Beijing food logistics investigation process,

it is found that only a few large supermarkets fixed

food traceability information query system, and

those equipments are often closed, in order that

consumers cannot query. But there is some

difference between truly finding the information

terminal system provided in the inquiry and the

whole process information query mentioned in the

traceability system. Information quantity is less in

the former, and it doesn't provide complete

information traceability really.

2.2 Analyzing the Influence Factors

of Retailers adopting the Food

Traceability Technology

Yang Qiu-hong (2008) thinks that factors

influencing cost of enterprises to establish the

traceability system include: the depth, width and

accuracy of the traceability system, the cooperation

relationship between the enterprise and the upstream

and downstream departments, enterprise production

process, technological factors. Factors influencing

profit of enterprises to establish the traceability

technology include mainly consumers’ willingness

to pay for the traceability food, probability of food

safety issues, the loss the food safety issues bring to

enterprise, the improvement of supply chain

efficiency after the establishment of the traceability

system, product differentiation and branding. The

author thinks retail enterprises whether to implement

the traceability technology will also influenced by

government support strength, competition between

colleague enterprises.

From the perspective of cost and profit, internal

game will happen in retail enterprise when deciding

whether to implement the traceability technology.

Overall, with the passage of time, implementing

subject of the traceability technology has a deep

knowledge of the system research, and accordingly

the management and technology level enhances

unceasingly. Therefore, the later the enterprise

implement the traceability technology, the less cost

they burden. On the other hand, with the passage of

time, the knowledge of the consumer to food

traceability technology increasing, and their

willingness to pay for the traceability technology

increases, too. Therefore, the earlier the enterprise

implements the traceability system, the more profit

they obtain.

From the perspective of competition, balanced

game will happen between retail enterprises when

deciding whether to implement the traceability

system. The enterprises taking the lead to use the

traceability system, will plunder the parts of the

market competition, but should burden higher cost,

and also consider that competitor will regain market

share after implementing the traceability technology;

the enterprises later using the traceability technology

will enjoy low cost but should undertake the risk of

losing market.

Therefore, when implementing the traceability

technology，retail enterprises should balance cost

and benefit, and the competition between the

colleagues, in order to attain their total profit

maximization.

3 ANALYZING THE TIMING

OF THE TRACEABILITY

TECHNOLOGY FOR

RETAILERS BY GAME MODEL

3.1 Basic Hypotheses

Supposing that there exist only two retailers in a

certain region and they are A and B. In order to

facilitate the calculation and without loss of

generality, let’s suppose that the market share of this

ESTABLISHING FOOD TRACEABILITY SYSTEM BASED ON GAME THEORY - From the Perspective of Retailers

369

region is divided equally by these two retailers. And

retailer A adopts the traceability technology first and

B later. If A makes the adoption at time

t and B at

time, it is apparent that

tt≤

.The consumers’

demand Q for food in the short term is constant.

Then the sales volume of traceability products can

*Q, in which

is the consumers’ preference

degree to buy traceability products. We can get

−

=−

where k is a constant. It means that

consumers’ preference degree improves with

increasing time.

(

)

is the benefit rate at time t and

(, )

s means the adoption strategies of A and B,

in which A adopts strategy

and B adopts

.When

=1 it means that the traceability

technology is adopted, but when

=0, the system is

not adopted. Then the total benefit rate of A and B

when they each makes different strategies can be

shown as below:

()

Qr ( , ) (1,1)

(1 ) ( , ) (1, 0)

(1 ) ( , ) (0, 1)

Qr ( , ) (0, 0)

Qrss

⎧

⎪

⎨

⎪

−=

⎪

⎩

Where

is the average profit of retail products.

The adoption cost of the traceability can be

calculated by

()

ct ae

−

and it means that with

time increasing, the management and technology

level of the traceability technology will be gradually

improved so that the adoption cost for retailers will

become lower and lower. The discount rate is

and

()

tΖ

is the expected benefit increase after the

adoption of the system.

3.2 Model Analysis

According to the actual situation, this paper has

mainly considered three situations: non-government

subsidy; the same government subsidy for adopting

the traceability technology; higher subsidy for who

adopts the system first.

3.2.1 The Non-government Subsidy

Situation

Without the adoption of the traceability technology

the benefit rate per unit of time for A is

; when A

adopt the system before B, it is

(1 )

; if A

adopt the system after B, it becomes

. Therefore,

the expected benefit increase for A is:

() ()

c(t )

QredtQredt

Qre dt e

αα

+∞

−−

+∞

−

Ζ= + +

−−

∫∫

∫

(1)

Calculate the first derivative of

(

)

tΖ

and we can

get:

1Qr

Qr 2a( k)k

⎡

⎤

=−

⎢

⎥

⎣

⎦

㏑

When

∗

， A can get the maximum benefit.

When A has adopted the system, if B gives up

adopting it

()

t(1)

=−

; if B also chooses to

adopt the system,

()

tQr

. Therefore, the

expected benefit increase for B is:

() ()

()

Qre dt Q re dt

ct e

αα

+∞ +∞

−−

−

Ζ= − −

−

∫∫

(2)

Calculate the first derivative of

(

)

tΖ

and we

can get:

1Qr

Qr 2a( k)k

⎡

⎤

=−

⎢

⎥

⎣

⎦

㏑

When

∗

， B can get the maximum benefit.

That is to say, we had better to make

∗∗

. Put

1Qr

Qr 2a( k)

∗∗

⎡

⎤

==−

⎢

⎥

⎣

⎦

㏑

in (1) and (2) we can get:

()

2( )

Qr a k

⎡⎤

=− <

⎢⎥

⎣⎦

(3)

()

(2())

2( )

kQr a k

Qr a k

Ζ=

⎡⎤

⎢⎥

⎣⎦

(4)

It can be seen from (3) and (4) that: when A has

adopted the system first, B can get a higher benefit if

it also adopts the system than if not, so the best

strategy for B is that once A adopts the system, B

should too; if B chooses to adopt the system right

after A’s adoption, A’s benefit will decrease, so the

best strategy for A is not to adopt it.

From the above the conclusion can be drawn that

ICEIS 2011 - 13th International Conference on Enterprise Information Systems

370

without the government subsidy, retailer A and

retailer B will not adopt the traceability technology.

3.2.2 The Same Government Subsidy

Situation

Supposing that government provides the same

subsidy G to those who adopt the traceability

technology no matter who adopts it first, then the

expected benefit increase for retailer A is:

() ()

()

QredtQredt

Qre dt c t e Ge

αα

+∞

−−

+∞

−−

−

Ζ= + +

−−+

∫∫

∫

(5)

Calculate the first derivative of

(

)

tΖ

and we

can get:

1Qr2G

Qr 2a( k)k

⎡⎤

=−

⎢⎥

⎣⎦

㏑

The expected benefit increase for retailer B is:

()

() ()

Qre dt

QredtcteGe

+∞

−

+∞

−

Ζ=

−− − +

∫

(6)

Calculate the first derivative of

(

)

tΖ

and we

can get:

1Qr2G

Qr 2a( k)k

⎡⎤

=−

⎢⎥

⎣⎦

㏑

Put

1Qr2G

Qr 2a( k)k

⎡⎤

==−

⎢⎥

⎣⎦

㏑

in (5) and (6) we

can get:

()

2( )

Qr a k

⎡⎤

Ζ=

⎢⎥

⎣⎦

⎡⎤

−

⎢⎥

⎣⎦

(7)

()

2( )

(2()) 2G

2( ) 2( )

Qr a k

kQr a k Qr

ak Qrak

αα

⎡⎤

Ζ=

⎢⎥

⎣⎦

⎡⎤

++ +

⎢⎥

+++

⎣⎦

(8)

From (7) and (8) the following conclusions can

be got. For retailer A, when

(

)

tΖ

＞ 0 i.e.

Qar

rak

, the benefit will get increased if it adopts

the system and it should adopt the system at time

;

when

Qar

rak

, the benefit will get decreased if it

adopts the system so it should give up the adoption.

While for retailer B, since

()

t0Ζ>

, if A has

adopted the system first, the best strategy for B is to

adopt the system, too.

From the above the conclusion can be drawn that

if government provides the same subsidy to those

who adopts the traceability technology: when

(

)

, A and B will adopt the system at the same

time; when

(

)

, neither A nor B will adopt the

system.

3.2.3 The Discrepant Government Subsidy

Situation

Supposing that government provides subsidy

G to

who adopts the traceability technology first and

to who adopts it later and

GG>

. Then the

expected benefit increase for retailer A is:

() ()

()

QredtQredt

Qre dt c t e G e

αα

+∞

−−

+∞

−−

−

Ζ= + +

−−+

∫∫

∫

Upon calculation, when

()

tΖ

gets the maximum

value

(

)

⊗

，

Qr 2 G

Qr 2a( k)k

⊗

⎡

⎤+

=−

⎢

⎥

⎣

⎦

㏑

. The expected

benefit increase for retailer B is:

() ()

()

QredtQredt

Qre dt c t e G e

αα

+∞

−−

+∞

−

Ζ= − +

−−+

∫∫

∫

Upon calculation, when

(

)

tΖ

gets the maximum

value

(

)

⊗

Qr 2 G

Qr 2a( k)k

⊗

⎡

⎤+

=−

⎢

⎥

⎣

⎦

㏑

When

(

)

⊗

: if

(

)()

⊗⊗

Ζ>Ζ

, A can get a

higher benefit, so both retailers want to adopt the

traceability technology at time

⊗

; if

(

)

(

)

⊗⊗

Ζ<Ζ

, A can get a certain benefit but B can

get more, so both retailers want to be the one who

make the adoption later and in this situation the

differentiation of government subsidy has lost its

meaning.

When

(

)

⊗

, A will get a decreased benefit

so no retailer will adopt the traceability technology.

ESTABLISHING FOOD TRACEABILITY SYSTEM BASED ON GAME THEORY - From the Perspective of Retailers

371

Above all, only when

(

)

⊗

Ζ>

and

(

)

(

)

⊗⊗

Ζ>Ζ

, can the differentiation of

government subsidy encourage retailers to adopt the

traceability technology earlier. What’s more, the

relevant numeric area of

and

can be get

from the above equations.

4 CONCLUSIONS

This paper has presented the current situation and

effect factors of retailer’s adoption of the traceability

technology, and made the game model to analyze the

timing of retailer’s adoption of the traceability

technology in three situations. Then, I reached the

conclusions: retails will not implement traceability

technology without subsidy; the measure of

providing higher subsidy for who adopts the system

first is

superior to others in term of timing and

government financial input.

In conclusion, it is rather

unrealistic to ask all

food retailers implement traceability technology.

However, if the government departments take the

measure of providing higher subsidy for who adopts

the system first, then c

ompetition among retails

would inspire other retailers to implement

traceability technology earlier, and a good basic for

food traceability standards would be set up.

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Fang Yan, Gao Guan, Fan Xinlu, 2005. Research on food

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Quality and Standards.

Moe T., 1998, Perspectives on traceability in food

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Golan E., Krissoff B., Kuchler F., et al. 2004, Traceability

in the U.S. food supply: Economic theory and industry

studies. Economic Research Service, U.S. Department

of Agriculture, Agricultural Economic Report.

Shi Yantao, 2006, Agricultural products traccability

system. Beijing: China agricultural university.

Chen Honghua, 2007, Research on agricultural products

traceability system in china. China Economist.

Yang Qiuhong, Wu Xiumin, 2008. The cost-benefit

analysis of food firms’ traceability systems. Journal of

Sichuan Agricultural University.

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