Background: We applied game theory to the organic tea certification process and traceability system used by the Taiwanese tea industry to elucidate the strategic choices made by tea farmers and organic tea certification agencies. Thus, this paper clarifies how relevant variables affect the organic certification process and traceability system used within the tea industry.
Results: The findings indicate that farmers who generate high revenues experience failures regarding tea deliveries, cash outflow, damage compensation, and quasi-rent. An additional problem included the high costs yielded when tea farmers colluded with or switched organic tea certification agencies. Furthermore, there could be decreasing levels of personal interest in planting non-organic tea and lowering the costs of planting organic tea and the managerial accounting costs of building comprehensive traceability systems; thus, the analysis yielded strong results and a superior equilibrium.
Conclusion: This research is unprecedented, using an innovative model and providing a novel analysis structure for use in the tea industry. These results contribute to the field of literature and should serve as a valuable reference for members of the tea industry, government, and academia.
Keywords: game theory; managerial accounting; organic tea certification; tea industry; traceability system.
© 2014 Society of Chemical Industry.