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Chinese Journal of Management Science ›› 2017, Vol. 25 ›› Issue (7): 93-101.doi: 10.16381/j.cnki.issn1003-207x.2017.07.011

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Stability Research for Cooperation Between Farmers and Dealers in China: An Analysis of Marketing Risks Sharing

ZHANG De-bin1,2, XU Juan1, Paul D. Mitchell2, LI Chong-guang1   

  1. 1. College Public Administration, Huazhong Agricultural University, Wuhan 430070, China;
    2. Department of Agriculture and Applied Economics, University of Wisconsin-Madison, WI, Madison USA
  • Received:2016-05-13 Revised:2016-09-16 Online:2017-07-20 Published:2017-09-25

Abstract: During the research of Chinese vegetable industry and National Science Foundation project of cooperative behaviors between farmers and deals,it is found that for fresh produce industry in some developing nations, there exists a critical problem: Price fluctuates sharply and usually with dealers drop out of the chain letting all the risk to farmers. Different to developed nations, farmers in these developing nations have different risk appetite and constraints. But there is the same thing for all situations, the only reason for any players to drop out is that they don't have or they don't think they have a reasonable benefits (or risk) share. So that in fresh vegetable industry, risk sharing mechanism which could consolidate the cooperation stability between farmers and dealers facing price fluctuations has been discussed. In this paper, firstly the betray behaviors disobeying signed contracts when in a bad marketing, actually lies in the shortage of realistic risk sharing mechanism, or which is unreasonable. It is believed that only rewards when choosing to betray is larger than that of perform, and it could be seen that the simple and rough contract having a fixed lower and upper purchasing price is vulnerable to fail without precise and rational calculations for future rewards. Secondly, based on the stability and Shapley value theory in Cooperative Game, a one dealer and many farmers group is developed into a n-person cooperative game model. The model followed by Sexton(1986) and with more specific description on Chinese farmer risk appetite and constraints which will be much closer to reality than Others. A matlab based analysis has also been done to find the objective function and constraint character. Resolutions for core and weighted Shapley value considering each partner's resources are also discussed. At last, primary influential factors and mechanisms for cooperative stability and weighted Shapley value are discussed, together with practical policy enlightenment ensuring contract stability for both sides.
It is found that currently in Chinese vegetable, the most important promotional factor is the risk sharing proportion rather than the introduction of social responsibility, which hints that when facing massive vegetable unmarketable, more efforts should be put on consumers or farmers, least the dealers. This will be beneficial to risk sharing research in farmers especially for fresh produce area. On one side it can be used to analyze risk appetite and price fluctuation in risk sharing from macro level as policy hints; on the other side, it also can be used as a micro analysis tool for specific cooperation on a specific risk sharing calculation.

Key words: risk sharing, weighted Shapley value, price fluctuations, cooperative game, cooperative behavior

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