Agricultural insurance and power structure in a capital-constrained supply chain

Abstract

This study focuses on an agricultural supply chain with a capital-constrained manufacturer, a bank and an insurer under three power structures: insurer-led Stackelberg (IS), bank-led Stackelberg (BS) and vertical Nash (VN). By establishing a two-level Stackelberg game, we examine the application condition and role of agricultural insurance under three channel structures and reveal the preferences of the supply chain and its participants for different channel structures. This study shows that, in either model, the manufacturer purchases agricultural insurance when the bank is highly loss-averse, but the probability of the manufacturer adopting agricultural insurance in the BS model is lower than that of the VN model but higher than that of the IS model. In these three models, the manufacturer’s application of agricultural insurance increases the profits of the manufacturer, bank and insurer but reduces supply chain efficiency. In addition, from the perspective of the profit level and profit share of supply chain participants, for the manufacturer, the VN model of the two-level supply chain power structure betters than the BS and IS models of the three-level supply chain power structure, but the BS model is superior to the IS model; for the bank and the insurer, the higher their leadership positions in which power structure model, the better the power structure model. From the perspective of the overall profit and efficiency of the agricultural supply chain, the model preference of the supply chain is the same as that of the manufacturer. The findings provide new theoretical insights for the application of agricultural insurance and power relationship in the agricultural supply chain.