Coordination of Low Carbon Agricultural Supply Chain Under Contract Farming

Abstract

Low carbon agriculture is defined as new agriculture model based on low energy consumptions, low pollution and low emissions. We consider a two-echelon supply chain under contract farming and model a bilateral monopoly between a single agricultural producer and a single processor. The demand of market is influenced by the retail price and the level of low carbon technology. The optimal solution in a supply chain is studied in the model of Stackelberg game and centrally coordinated system. In the Stackelberg game model, the low-carbon technology, order quantity of the processor and the total profit of supply chain are all smaller than that in centrally coordinated system. Then revenue and cost sharing contract is designed to coordinate the supply chain. Then revenue and cost sharing contract is proposed. It's verified that supply chain profits are attained at the same level as in a centrally coordinated system with revenue and cost sharing contract.