Optimal Decisions for Contract Farming under Weather Risk
Weather risk causes uncertain crop yield and price and further influences the willingness of farmers to participate in contract farming and honour the contract. In this study, we investigate the optimal decisions for contract farming between a profit-maximizing manufacturer and multiple identical fa...
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| Format: | Article |
| Language: | English |
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Wiley
2022-01-01
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| Series: | Discrete Dynamics in Nature and Society |
| Online Access: | http://dx.doi.org/10.1155/2022/9668872 |
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| _version_ | 1832563550838587392 |
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| author | Xinping Wang Shengnan Sun |
| author_facet | Xinping Wang Shengnan Sun |
| author_sort | Xinping Wang |
| collection | DOAJ |
| description | Weather risk causes uncertain crop yield and price and further influences the willingness of farmers to participate in contract farming and honour the contract. In this study, we investigate the optimal decisions for contract farming between a profit-maximizing manufacturer and multiple identical farmers under weather risk, using a game-theoretical approach. We discuss two different cases. In the first case, the manufacturer sets a contract price to ensure farmers to honour the contract under any weather condition. While in the second case, the manufacturer sets a lower contract price only to guarantee that farmers will not renege under certain weather condition but has a second chance to purchase products from the reneged farmers at a renegotiated price. We derive the optimal decisions of the manufacturer in both cases and show that the manufacturer gains much more profits in the second case, and therefore, the decisions in the second case are optimal. Moreover, we numerically investigate the sensitivity of the effectiveness of contract farming and the manufacturer’s optimal decisions to model parameters and get more managerial implications. |
| format | Article |
| id | doaj-art-3a768804567743079b7d89541e11bd27 |
| institution | Kabale University |
| issn | 1607-887X |
| language | English |
| publishDate | 2022-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Discrete Dynamics in Nature and Society |
| spelling | doaj-art-3a768804567743079b7d89541e11bd272025-02-03T01:13:06ZengWileyDiscrete Dynamics in Nature and Society1607-887X2022-01-01202210.1155/2022/9668872Optimal Decisions for Contract Farming under Weather RiskXinping Wang0Shengnan Sun1College of Economics and ManagementSchool of Economics and ManagementWeather risk causes uncertain crop yield and price and further influences the willingness of farmers to participate in contract farming and honour the contract. In this study, we investigate the optimal decisions for contract farming between a profit-maximizing manufacturer and multiple identical farmers under weather risk, using a game-theoretical approach. We discuss two different cases. In the first case, the manufacturer sets a contract price to ensure farmers to honour the contract under any weather condition. While in the second case, the manufacturer sets a lower contract price only to guarantee that farmers will not renege under certain weather condition but has a second chance to purchase products from the reneged farmers at a renegotiated price. We derive the optimal decisions of the manufacturer in both cases and show that the manufacturer gains much more profits in the second case, and therefore, the decisions in the second case are optimal. Moreover, we numerically investigate the sensitivity of the effectiveness of contract farming and the manufacturer’s optimal decisions to model parameters and get more managerial implications.http://dx.doi.org/10.1155/2022/9668872 |
| spellingShingle | Xinping Wang Shengnan Sun Optimal Decisions for Contract Farming under Weather Risk Discrete Dynamics in Nature and Society |
| title | Optimal Decisions for Contract Farming under Weather Risk |
| title_full | Optimal Decisions for Contract Farming under Weather Risk |
| title_fullStr | Optimal Decisions for Contract Farming under Weather Risk |
| title_full_unstemmed | Optimal Decisions for Contract Farming under Weather Risk |
| title_short | Optimal Decisions for Contract Farming under Weather Risk |
| title_sort | optimal decisions for contract farming under weather risk |
| url | http://dx.doi.org/10.1155/2022/9668872 |
| work_keys_str_mv | AT xinpingwang optimaldecisionsforcontractfarmingunderweatherrisk AT shengnansun optimaldecisionsforcontractfarmingunderweatherrisk |