win–win contract farming in dual-channel agribusiness supply chains under yield, quality, and price uncertainty

Abstract

Despite the benefits of contract farming, power imbalances between farmers and agribusiness firms often result in unfair agreements. This study aims to design a fair (win–win) contract farming model for a dual-channel (fresh and processed) blueberry supply chain , incorporating an incentive mechanism to ensure that all parties benefit. We examine the benefits of incentive-based contracts over penalty-based contracts by analytically investigating three farming situations: (1) no contract, (2) penalty-based contract farming, and (3) incentive-based contract farming. We establish analytical conditions for collaborative incentive-based contract terms that benefit both parties and validate these conditions numerically using data from a representative blueberry farm. Our findings indicate that the incentive-based contract farming leads to mutually beneficial outcomes and higher supply chain profits compared to the penalty-based contract. We conduct numerical and comprehensive sensitivity analyses to assess the impact of contract farming on the profits of the farmer, agribusiness firm, and the overall supply chain. Our study has significant theoretical and practical implications, emphasizing the importance of balanced and mutually beneficial contract farming arrangements that account for yield, price, and quality uncertainties within a dual-channel supply chain.

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