Negotiation Model For “Company+Farmer” Contract Farming Supply Chain Under Random Yield Environment

Base on analyzing the characters of the whole contract-farming in China, we build a decision-making model about contract-farming supply chain consisting of a risk-neutral company and some risk-averse farmer(or farmers). Mainly investigate the effect on both company and farmer’s decision-making behavior by the random yield causing by disastrous weather or injurious insect and the risk averse degree of farmer, aim to propose a new prospective of Nash-negotiation to improve the revenue of both supply chain partners, and then enhance the order stability.First of all, the optimal decision-making of the supply chain members is analysed by comparing the centralized decision-making model with decentralized decision-making model on the condition of the agricultural production process uncertainty. The result shows that the farmer’s optimal agricultural materials input amount by the decentralized decision-making model is strictly less than the optimal concentration of agricultural materials input amount;Meanwhile, the result also shows that the whole yield of the supply chain by the decentralized decision-making model is strictly less than the sum yield of the company and the farmer by the centralized decision-making model.Then, study a two-stage contract-farming supply chain consisting of one risk-neutral company and one risk-averse farmer with random output. And in this supply chain both parties decide their own optimal agricultural materials input quantity and wholesale price by the way of Nash negotiation mechanism. The results show that there exists equilibrium solution in this cooperative game. In addition, the results also show that the optimal agricultural materials input quantity and wholesale price under Nash-negotiation mechanism are higher than those under the decentralized decision model. Furthermore, under the cooperative game, the optimal agricultural materials input quantity will increase in farmer’s degree of risk-averse. On the contrary, the optimal order price will be decrease with the increasing of farmer’s degree of risk-averse index. And comparing with the decentralized decision model, both the risk-neutral company and the risk-averse farmer can achieve the Pareto improvement with the Nash negotiation mechanism.Meanwhile,this research studies the multilateral negotiations of the contract-farming supply chain consisting of a risk-neutral company and two risk-averse farmers. Rule of the multilateral negotiations is that the company will negotiate with each farmer in turn. The strategy for the company is negotiating on behalf of itself, the other strategy for the company is negotiating on behalf of the company itself and the farmer has not been involved in the negotiations for bilateral talks. Finally, we show the optimal decision and utility of both the company and the farmers. We also analyze the effects on the optimal decision by the farmers’ risk aversion and different negotiation strategies, meanwhile analyze the preferences of farmer and company for different negotiation strategies.Finally, this article will expand the number of farmers from 2 to n, and take the same rule of negotiation to research the optimal decision-making of the contract-farming supply chain consisting of a risk-neutral company and n risk-averse farmers. The results shows that there still exists the equilibrium solution for the Nash multilateral negotiation. Meanwhile the optimal agricultural materials input quantity will remain the same, the agribusiness will give the farmers the higher order price in the strategy that the agribusiness negotiating with the farmers on behalf of itself than in the other strategy. The results also show that the farmers prefer the strategy that the agribusiness negotiating with the farmers on behalf of itself, but the company prefers the other strategy, and in the strategy that the agribusiness negotiating with the farmers on behalf of itself, the later the farmer participates in the negotiation, the larger utility he obtains, the last farmer obtains the same utility with the farmers in the strategy that the agribusiness negotiating with the farmers on behalf of not only himself but also the farmers not yet participating in the negotiation.