Strategic Government Support Policies in the Wheat Supply Chain: A Game-Theoretic Analysis

Abstract Achieving wheat self-sufficiency requires effective government support mechanisms that appropriately align farmer production incentives with national food security objectives. This study analyzes the strategic interaction between government support policies and farmer production decisions within the wheat supply chain using a game-theoretic framework. We model the sequential interaction between the government and farmers to evaluate the equilibrium outcomes of financial instruments, specifically subsidies and loans. We propose a novel hybrid support policy and derive the Subgame Perfect Nash Equilibrium to determine the optimal production quantities and associated costs. Such policies by the government include ‘subsidy’ payments as well as providing ‘loans’ for the farmers. Additionally, this study proposes a policy on wheat production by farmers that could be quite influential on the production rate. Theoretical results demonstrate that the proposed mechanism strictly dominates traditional subsidy schemes by optimizing the incentive structure, leading to higher equilibrium production rates. These findings contribute to the industrial organization of agricultural markets by quantifying the impact of strategic policy design on supply chain performance.