Optimal Operational and Financing Strategies for a Capital-Constrained Agricultural Supply Chain with Two-Dimensional Fairness Concerns

In agricultural supply chains, most farmers are troubled by production capital constraints, resulting in inability to expand production scale. Although agricultural supply chain finance (ASCF) is of great significance, its research is still in its infancy. This study structures an agricultural supply chain consisting of a capital-constrained farmer and two compete retailers, then analyzes the operational and financing strategies of the supply chain under the influence of the farmer’s vertical fairness concern and the small retailer’s horizontal fairness concern respectively. As real practice, this study explicitly examines the efficacy of two financing strategies - bank financing (BF) and trade credit financing (TCF) - from the perspective of the farmer, and found that the farmer’s operational and financing strategies are influenced by both financing rates and two-dimensional fairness concerns. Firstly, results show that the farmer is more likely to choose the TCF strategy with a higher interest rate when the difference between the interest rate of TCF and BF is within a certain limit. Otherwise, the farmer will choose the BF strategy. Secondly, the research interestingly finds that the farmer’s vertical fairness concern can promote upstream income of the supply chain to a certain extent. The retailers’ response degree to the farmer’s vertical fairness concern in the TCF scheme is smaller than that in the BF scheme. Thirdly, the retailer’s horizontal fairness concern is beneficial to the farmer and leads to a loss of profit for themself and the peer retailer. What doesn’t fit previous perception is the retailer’s horizontal fairness concern not only narrowing the profit gap between supply chain members, but also providing higher-quality agricultural products to the market. Lastly, two-dimensional fairness concerns have impacts on the farmer’s choice of financing mode, the threshold for the farmer to change financing strategy decreases in the coefficient of vertical and horizontal fairness concerns