Abstract:

The incentive mechanism of a price subsidy contract for a two-level agricultural product supply chain was studied. The supply chain consisted of one manufacturer and two suppliers. The former was the leader, and the latter which had fairness preferences were the followers. The product quality was decided by sampling inspection. The results under the riskneutral assumption showed that, when the  inspection cost coefficient was little and the product randomness was strong, the extreme team achievement evaluation contract should be adopted, and the incentive efficiency was the same as that of selfinterest. In other cases, the middle joint contract was better than the extreme relation achievement evaluation contract except when  guilt mentality was strong. Also, the incentive efficiency was promoted, and the incentive efficiency income had a positive relationship with the inspection cost coefficient and a negative relationship with the intensity of product randomness.

Key words: agricultural product supply chain, fairness preferences, incentive, price subsidy contract