Financing and coordination of the agricultural supply chain considering government-enterprise guarantee

Abstract

We examine an agricultural supply chain consisting of a core enterprise and a capital constrained farmer and assess the yield uncertainty of farmer’s production. We explore two kinds of financing models: traditional bank financing and government-enterprise guarantee financing. To coordinate the supply chain, a price commitment contract and a revenue-sharing contract are considered. Our results show that no matter in bank or government-enterprise guarantee financing model, we can find the conditions for full coordination of the supply chain with any contract. However, in the government enterprise guarantee financing model, when a farmer has bankrupt risk in a low-yield season and no bankrupt risk in a high-yield season, the revenue-sharing contract can simultaneously make the supply chain fully coordinated and achieve Pareto improvement to maximize the profits of the entire supply chain and achieve a win-win situation. In addition, the farmer and enterprise prefer to choose the financing model with a higher promised price and a higher revenue-sharing ratio, and the social welfare under the government-enterprise guarantee financing model is higher than that under the traditional bank financing model.