Brand Subsidy Strategies for Mitigating Agricultural Product Supply Risks Under Capital Limitation

Abstract

This study investigates the application of brand subsidies to capitalize on limited capital in the context of branded agricultural products facing supply risks, aiming to identify a win-win subsidy decision-making model. We consider a supply chain for branded agricultural products comprising financially constrained farmers and financially robust retailers. Financially constrained farmers, who can produce without loans under normal conditions, resort to bank loans to supply branded agricultural products when faced with supply risks. We find that under capital constraints, brand subsidies consistently yield higher returns in terms of brand strength and market demand. Moreover, even after adjusting for supply risks through posterior probability, brand subsidies continue to deliver superior returns.