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

Liurui Deng, Shuge Wang, Yixuan Wen and Yuting Li
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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

Mathematics, 2021, vol. 10, issue 1, 1-22

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.

Keywords: agricultural supply chain; output uncertainty; assets mortgage; risk sharing (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2021
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