The Study on Side Payment Incentive Mechanism in “Company+Farmer”Contract-farming Supply Chain

One of the causes for the low-fulfillment rate of contract-farming lies in the poor allocation of benefits between company and farmer. This research builds a side payment incentive mechanism of “buying at price floor, following the market, profit returns” by the method of side payment contract design in supply chain sequential game. By changing the paying function of company and farmer, both sides practise two phases of dynamic game to decentralize decision, while subgame perfect Nash equilibrium has the same solutions with Pareto equilibrium. It uses the bargain model of Rubinstein-Stah1 bid in turn to allocate incremental profit within the system. The study shows: the mechanism that“buying at price floor, following the market, profit returns” is rational and practical, which helps to improve the company, farmer and supply chain as well as Pareto while realizing the rational allocation of incremental profit, and improving the compliance rate of contract-farming.