Managing near-expired food commercialization under different commission schemes

This study models the strategic interplay between a fresh-food retailer and an online platform to guide retailers in the emerging market for near-expired food (NEF), a critical challenge in sustainable food supply chains. We construct a Stackelberg game incorporating a Hotelling framework with vertical differentiation to capture consumer heterogeneity and the cannibalization effect during food inventory clearance. Comparing equilibrium outcomes under Pay-per-Order (PPO) and Pay-per-Sale (PPS) schemes, we find that PPO exhibits a single-threshold structure, whereas PPS induces a double-threshold structure where full commercialization is optimal only within an intermediate range of generated NEF inventory. Our sensitivity analysis warns retailers against indiscriminately promoting NEF (e.g., by boosting consumers’ valuation), which may exacerbate the cannibalization of the fresh food supply chain and harm profitability. Furthermore, we show that the retailer’s reservation utility governs the food waste reduction potential of both commission schemes: PPO is more effective in reducing food waste when the reservation utility is high, whereas PPS is more environmentally optimal when the reservation utility is low. Crucially, this study reveals that the retailer’s optimal commercialization strategy surprisingly aligns with the outcomes under social welfare and consumer surplus maximization, offering new theoretical perspectives on sustainable logistics and supply chain management in NEF commercialization.