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Decision-making and performance of the agricultural supply chain: risk-neutral farmer vs target-oriented farmer

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Listed:
  • Luqi Qin

    (Hunan University)

  • Erbao Cao

    (Hunan University)

Abstract

We investigated the impact of a target-oriented farmer’s optimal decisions on the performance of an agricultural supply chain with a capital-constrained smallholder farmer and an intermediary platform, which the stochastic demand follows a uniform distribution. Our research results show that due to the double marginalization effect caused by the introduction of an intermediate platform in the agricultural supply chain, the production quantity of a risk-neutral farmer is less than that of the centralized production quantity. However, a target-oriented farmer can reduce the double marginal effect and make the production quantity higher than that of the centralized production quantity. Intuitively, the platform benefits from the increase in unit commission. Counterintuitively, when the target-oriented farmer’s target is high, the increasing unit commission harms the profit of the intermediary platform. In addition, the target-oriented farmer can help the supply chain achieve the efficiency of a risk-neutral centralized supply chain. We extended our analysis to an exponential distribution and showed that the major findings of the basic model are robust and valid. Moreover, we showed that the platform should not ignore the impact of the farmer’s target.

Suggested Citation

  • Luqi Qin & Erbao Cao, 2024. "Decision-making and performance of the agricultural supply chain: risk-neutral farmer vs target-oriented farmer," Annals of Operations Research, Springer, vol. 340(2), pages 961-980, September.
    • Handle: RePEc:spr:annopr:v:340:y:2024:i:2:d:10.1007_s10479-024-05984-9
    DOI: 10.1007/s10479-024-05984-9
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    References listed on IDEAS

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