The Impact of the Cost-Sharing Contract on Capital-Constrained Agricultural Supply Chains

Abstract

This study attempts to determine the optimal production and pricing decisions of E-Agri-SCF (agricultural product supply chain financed by e-commerce) and analyzes the influence of financing parameters on the optimal decision. Research indicates that the optimal purchase price decision increases with the expansion of the financing interest rate and declines with the expansion of the capital opportunity cost. The expected output factor of agricultural products has no influence on the optimal purchase price decision. The optimal production decision of the farmer declines with the expansion of the financing interest rate and the opportunity cost of capital and increases with the increase in the expected output factor of agricultural products. In particular, we show that due to the uncertainty in the output of agricultural products, the losses caused by decentralized decision-making in the E-Agri-SCF will increase. Therefore, this article proposes using a cost-sharing contract to promote the coordination of E-Agri-SCF. We prove that when farmers share more costs, they obtain higher benefits, while the e-commerce platform does the opposite. This is because the participation of e-commerce platforms in financing has changed the revenue structure of the supply chain. The findings of this article are very meaningful, as they provide management opinions on the financing terms of E-Agri-SCF.

Research of Agricultural Supply Chain Finance Based on Blockchain Technology: Findings from Chinese Industry

“…Due to the popularity of e-commerce, the opportunities for agricultural enterprises to use supply chain finance for capital replenishment have greatly increased. The decrease in financing interest rates and the increase in capital opportunities will positively affect farmers' optimal production decisions and increase their expected returns [6]. In the financing process, leveraging the coordinating role of intermediary platforms can significantly improve the welfare of farmers and the total profit of the supply chain, while also fulfilling the increasing attention to social responsibility, bringing win-win results to farmers, platforms, and the entire supply chain [7].…”