We consider a capital-constrained contract-farming supply chain with a risk-averse farmer and a risk-neutral agro-dealer, where the farmer faces some yield uncertainty that can be covered by insurance. Using the Stackelberg model, we derive the optimal strategies on the insured level, production and wholesale price. The result shows that farmers with low risk aversion tend not to be insured, while those with high risk aversion tend to insure. Further analysis indicates that, as the degree of the farmer’s risk aversion increases, the farm size decreases, but the yield per unit area and the wholesale price of the agricultural product increases. In addition, yield insurance and premium subsidies can lead to a decrease of the yield per unit area. However, the expansion of the farm size can compensate for the inhibitory effect of the decrease of yield per unit area on the total yield, and thus the total yield increases. We also find that when the premium subsidy rate is low, the yield insurance’s value to farmers is negative. Moreover, the yield insurance’s value to farmers increases with respect to the bank’s interest rate.
Keywords: Contract-farming, yield uncertainty, yield insurance, capital constraint, risk-averse
@article{RO_2021__55_2_521_0,
author = {Shi, Ligang and Pang, Tao and Peng, Hongjun},
title = {Optimal strategies for a capital constrained contract-farming supply chain with yield insurance},
journal = {RAIRO. Operations Research},
pages = {521--544},
year = {2021},
publisher = {EDP-Sciences},
volume = {55},
number = {2},
doi = {10.1051/ro/2021006},
mrnumber = {4238790},
language = {en},
url = {https://www.numdam.org/articles/10.1051/ro/2021006/}
}
TY - JOUR AU - Shi, Ligang AU - Pang, Tao AU - Peng, Hongjun TI - Optimal strategies for a capital constrained contract-farming supply chain with yield insurance JO - RAIRO. Operations Research PY - 2021 SP - 521 EP - 544 VL - 55 IS - 2 PB - EDP-Sciences UR - https://www.numdam.org/articles/10.1051/ro/2021006/ DO - 10.1051/ro/2021006 LA - en ID - RO_2021__55_2_521_0 ER -
%0 Journal Article %A Shi, Ligang %A Pang, Tao %A Peng, Hongjun %T Optimal strategies for a capital constrained contract-farming supply chain with yield insurance %J RAIRO. Operations Research %D 2021 %P 521-544 %V 55 %N 2 %I EDP-Sciences %U https://www.numdam.org/articles/10.1051/ro/2021006/ %R 10.1051/ro/2021006 %G en %F RO_2021__55_2_521_0
Shi, Ligang; Pang, Tao; Peng, Hongjun. Optimal strategies for a capital constrained contract-farming supply chain with yield insurance. RAIRO. Operations Research, Tome 55 (2021) no. 2, pp. 521-544. doi: 10.1051/ro/2021006
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