Research on a Self-enforcing Mechanism of Contract between the Processors and Growers:A Risk Premium Approach
Wenbin Cao · Cai-mao yanjiu · 2010
The model of Processors + Growers has been facing an increasing number of problems and difficulties during its operation.The instability and the high default rate of these contracts have prompted us to analyze the inner mechanisms and design more effective forms of contracts.As Chinas law enforcement contract is still not fully implemented,the reasonable risk-sharing mechanism should be the basic direction to solve the high default rates of these contracts and improve the operational efficiency.On repeated game theory,the paper shows that a reasonable risk premium which the processors promised to give growers will help to curb the processors' default tendency and ensure stability.