Collaboration strategies for technology investment in agricultural supply chains: The value of platform financing

To address financial challenges faced by farmers due to advancements in modern agriculture, powerful platforms may offer farmers loan services or share technology investment costs. In this research, we explore a contract farming supply chain involving a platform and a farmer, both facing uncertainties in yield or demand. The platform can invest in sales efforts to boost demand, while the farmer can improve yield through investments in planting technology. Using game-theoretic models, we analyze the interactions between bank financing and platform financing and assess how cost-sharing affects financing equilibrium. Our study reveals several important findings. First, only when both the platform’s loan interest rate and the planting technology investment efficiency are either high or low, does the farmer opt for platform financing due to higher wholesale prices. Counter-intuitively, a reduced interest rate benefits the platform in offering loan services, while a higher rate might be more beneficial for the farmer. Second, if both the platform loan interest rate and the investment efficiency of planting technology are low (or high), a platform financing equilibrium with cost-sharing (or a bank financing equilibrium without cost-sharing) can be achieved. Furthermore, cost-sharing enhances the likelihood of benefiting from platform financing. Third, under bank financing, cost-sharing always places the farmer at a disadvantage. In contrast, under platform financing, a relatively low cost-sharing ratio from the platform can benefit the farmer, leading to a win-win outcome. Therefore, the platform should provide loan services and cost-sharing to the farmer simultaneously.