Coordination Mechanism for Contract Farming Supply Chain with Government Option Premium Subsidies

In this paper, we propose a new coordination mechanism of contract farming supply chain (hereinafter refer to as “company + farmer + option premium subsidy” or “the new/proposed mechanism”). In the new mechanism, the farmer’s interests are fully guarded by the protection price. Options are adopted by the company to hedge the downside risk and the government provides the company with option premium subsidies aiming to avoid default risk. The...