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Incorporating ‘Mortgage-Loan’ Contracts into an Agricultural Supply Chain Model under Stochastic Output

Author

Listed:
  • Liurui Deng

    (Business School, Hunan Normal University, Changsha 410081, China)

  • Shuge Wang

    (Business School, Hunan Normal University, Changsha 410081, China)

  • Yixuan Wen

    (Business School, Hunan Normal University, Changsha 410081, China)

  • Yuting Li

    (Business School, Hunan Normal University, Changsha 410081, China)

Abstract

This paper constructs an internal financing model in which the purchaser acts as the core leading enterprise to provide loans when the farmer has fixed assets as collateral. Numerical results show that the existence of fixed assets will increase the expected profit of the farmer, redistributing the risk and profit between the purchaser and the farmer. At the same time, the purchaser and the government are encouraged to provide more funds to the farmer with low value of its fixed assets, which will aid the overall return of the supply chain and the development of supply chain finance. In addition, under the framework of this model, the increase of agricultural production is beneficial to the farmer, not the purchaser. In the case of the same output level, we can alleviate this problem by selecting high-end agricultural products with high price elasticity of demand and high choking price so as to improve the profits of both purchaser and farmer.

Suggested Citation

  • Liurui Deng & Shuge Wang & Yixuan Wen & Yuting Li, 2021. "Incorporating ‘Mortgage-Loan’ Contracts into an Agricultural Supply Chain Model under Stochastic Output," Mathematics, MDPI, vol. 10(1), pages 1-22, December.
    • Handle: RePEc:gam:jmathe:v:10:y:2021:i:1:p:85-:d:711928
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    References listed on IDEAS

    as
    1. David P. Baron, 1973. "Point Estimation and Risk Preferences," Discussion Papers 43, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    2. Barry Alan Pasternack, 1985. "Optimal Pricing and Return Policies for Perishable Commodities," Marketing Science, INFORMS, vol. 4(2), pages 166-176.
    3. Gérard P. Cachon & Martin A. Lariviere, 2005. "Supply Chain Coordination with Revenue-Sharing Contracts: Strengths and Limitations," Management Science, INFORMS, vol. 51(1), pages 30-44, January.
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