Contract farming or land as share? Analysis of optimal strategies in a green agricultural supply chain with fairness concerns

In this study, to examine the impact of farmers’ fairness concerns on farming cooperation modes in the green agricultural product supply chain (GAPSC), we develop a three-level Stackelberg game model consisting of a farmer, an agribusiness, and the government under two farming modes: Contract Farming (CF) and LS. Our results reveal that in both modes, the production quantity and government subsidies decrease as farmers’ fairness concerns intensify. However, in the LS mode, the effect of fairness concerns on subsidies additionally depends on the agribusiness’s planting cost coefficient and the income distribution ratio. Furthermore, the influence of production uncertainty on per-unit subsidies is more intricate in the LS mode compared to the CF mode. We further find that the optimal choice between CF and LS primarily hinges on the basic wage offered by agribusiness to farmers. When the wage in the LS mode is moderate and the market potential is substantial, farmers’ utility in the CF mode surpasses that in the LS mode if the green effort coefficient takes extreme values. Conversely, when the wage in the LS mode exceeds a certain threshold, farmers’ utility under LS outperforms that under CF. For agribusiness, when the wage in the LS mode is high and the market potential is significant, if the green effort coefficient is extreme, profits in the CF mode exceed those in the LS mode. These findings provide valuable managerial implications for farmers and agribusiness in selecting contract modes and for policymakers in designing government subsidies within the GAPSC.