Green Investment Decisions and Coordination in a Green Agri-Product Supply Chain considering Risk Aversion and Bargaining Power under Different Channel Power Structures

Abstract

With eco-friendly green agriculture becoming the development trend of modern agriculture, how to make green investments and how to coordinate the supply chain become the key issues of agricultural green development. Using game theory and optimization theory, this paper studies the green investment decision in a two-echelon agricultural supply chain composed of a risk-averse farmer and a risk-neutral retailer under different power structures including three kinds of decentralized decision making and three kinds of cooperative decision making and conducts the supply chain coordination based on generalized Nash bargaining model. The results show that under decentralized decision making, Nash vertical, farmer-led, and retailer-led maximizes green investment level, the expected utility of farmer and retailer, respectively. In addition, the cooperative decision increases the marginal revenue, sales price, and the expected utility of the retailer and decreases the expectations of farmers. Except for retailer-led cooperative decisions, all cooperative decisions have increased the level of green investment and wholesale prices; among the six decision models, the green investment level is negatively correlated with risk aversion, while it is positively correlated with the cost-sharing contract. The optimal cost-sharing ratio is positively correlated with risk aversion and bargaining power. The cost-sharing contracts are invalid when farmers have full bargaining power. Numerical analysis shows that a cost-sharing contract with equal bargaining power can achieve perfect coordination in the supply chain.