Government agriculture schemes in the presence of social influence and technological advancement

Water-saving technologies contribute to mitigating the environmental impact of agriculture and raising farmers' incomes by reducing production input and enhancing crop quality. The promotion of water-saving technologies commonly requires government support and intervention. This study investigates two subsidy schemes: the dynamic scheme and commitment scheme, in terms of social welfare, supplier profits and farmer surplus. We develop an analytical model to analyze the interactions within an agricultural supply chain consisting of a government, a water-saving equipment supplier and heterogeneous farmers across two periods, taking social influence and technological advancement into consideration. The result shows that the impact of social influence on social welfare is associated with the service life of the equipment. Moreover, our findings indicate that the dynamic scheme can better address the uncertainty associated with the advancement in technology. Specifically, the dynamic scheme can concurrently enhance the interests of the supplier and farmers. Finally, we further generalize the model by including the farmers' learning-by-doing behaviors and provide relevant managerial implications for practice.