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An examination of the role of price insurance products in stimulating investment in agriculture supply chains for sustained productivity

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  • Assa, Hirbod
  • Sharifi, Hossein
  • Lyons, Andrew

Abstract

This study examines how managing risk by introducing commodity price insurances may improve the likelihood of increased investment in agri-food supply chains. A model is introduced which shows how insurance products on index prices can reduce the uncertainty of the impact of investment, and also how lower investment can generate the same impact as a higher investment. To show our results, we use two different frameworks which include total profit (Pareto optimal) and Stackelberg game setups. The results demonstrate that in both frameworks the investment will have a greater impact when an insurance product is present. By implication, the study presents an encouraging message to the insurance industry to introduce products to secure supply chain actors’ revenue leading to an increase in investment rate. Consequently, the study offers insight into how the role of traditional government subsidies for protecting farmers, particularly the small to medium-sized farms, may be revisited by replacing some of the existing subsidisation policies with revenue insurance.

Suggested Citation

  • Assa, Hirbod & Sharifi, Hossein & Lyons, Andrew, 2021. "An examination of the role of price insurance products in stimulating investment in agriculture supply chains for sustained productivity," European Journal of Operational Research, Elsevier, vol. 288(3), pages 918-934.
    • Handle: RePEc:eee:ejores:v:288:y:2021:i:3:p:918-934
    DOI: 10.1016/j.ejor.2020.06.030
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    References listed on IDEAS

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    2. Himanshu Gupta & Manjeet Kharub & Kumar Shreshth & Ashwani Kumar & Donald Huisingh & Anil Kumar, 2023. "Evaluation of strategies to manage risks in smart, sustainable agri‐logistics sector: A Bayesian‐based group decision‐making approach," Business Strategy and the Environment, Wiley Blackwell, vol. 32(7), pages 4335-4359, November.
    3. Boonen, Tim J. & Ghossoub, Mario, 2023. "Bowley vs. Pareto optima in reinsurance contracting," European Journal of Operational Research, Elsevier, vol. 307(1), pages 382-391.
    4. Sushil Gupta & Hossein Rikhtehgar Berenji & Manish Shukla & Nagesh N. Murthy, 2023. "Opportunities in farming research from an operations management perspective," Production and Operations Management, Production and Operations Management Society, vol. 32(6), pages 1577-1596, June.
    5. Wenyuan Hua & Zhihan Chen & Liangguo Luo, 2022. "The Effect of the Major-Grain-Producing-Areas Oriented Policy on Crop Production: Evidence from China," Land, MDPI, vol. 11(9), pages 1-28, August.
    6. Hezarkhani, Behzad & Demirel, Guven & Bouchery, Yann & Dora, Manoj, 2023. "Can “ugly veg” supply chains reduce food loss?," European Journal of Operational Research, Elsevier, vol. 309(1), pages 117-132.
    7. Pagare, Dewang & Biswas, Indranil & Agrahari, Amit & Ghosh, Sriparna, 2023. "A small farmer’s market choice in the presence of multiple markets: The Indian case," European Journal of Operational Research, Elsevier, vol. 311(2), pages 739-753.

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