A Study on Green Agricultural Production Decision-Making by Agricultural Cooperatives under Government Subsidies
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1. Introduction
As living standards have increased over time, an increasing number of consumers have realized that conventional agricultural products are detrimental to their health. As a result, they have started to seek out green agricultural products [1]. This trend becomes even more pronounced when new parents are tasked with regulating the diets of their infants [2]. Green agricultural products in China are comparable to organic agricultural products in that they are subject to more rigorous environmental quality standards than conventional agricultural products. The specifications must be adhered to by the pollution indices of each evaluation project. Additionally, the utilization of synthetic chemical substances during the production process is strictly forbidden. These prohibitions are in place to mitigate the detrimental environmental effects that may arise from the manufacturing process. To ensure the quality of agricultural products, the Chinese government has enacted regulatory standards, including the China Organic Standard certification. This certification verifies the absence of chemically synthesized products, genetically modified organisms, and environmental contamination. Green production methods that result in the production of environmentally friendly goods can increase agricultural output efficiency, decrease resource waste and contamination, and contribute positively to the maintenance of agricultural competitiveness and economic vitality [3]. Based on the China Agricultural Green Development Report 2022, the cumulative count of validly labeled units of organic agricultural products and green agricultural products in China is 60,254 and 27,246, respectively. These figures represent year-on-year growth rates of 10 percent and 8.3 percent. The report further highlights the substantial influence that the advancement of green agricultural products has already exerted on the ecological environment of China. Furthermore, while green agricultural products may not exhibit superior health qualities compared to conventional agricultural products, they play a crucial role in ensuring the safety of food for consumers [4].
Agricultural cooperatives, as the main production body of green agricultural products, often do not have a good economic income because they face problems such as insufficient motivation for green production, insufficient sustainability of green production, and difficulties in the implementation of branding strategies [5]. Farmers form agricultural cooperatives, which are small, cooperative, and mutually supportive organizations that increase the likelihood of reducing fertilizer and pesticide use on farms and increasing net returns per unit of fertilizer and pesticide [6] by working together. However, due to the high requirements of green agricultural products regarding the production environment and production materials, more time, energy, and capital are required for their production. Furthermore, information asymmetry and other issues among the members of agricultural cooperatives may arise, resulting in a dearth of incentives for green production [7]. Similarly, agricultural cooperatives face a lack of sustainability. On the one hand, agricultural cooperatives may find it difficult to maintain sustained green production due to factors such as smaller market demand; on the other hand, some agricultural cooperatives may engage in short-term behaviors, such as free riding, in the production process, pursuing immediate benefits at the expense of long-term sustainable development. In the context of green branding strategies for agricultural cooperatives, brand recognition refers to the way consumers identify a brand through visual or auditory cues and other elements of the brand identity. If an agricultural cooperative has a certain level of brand recognition, this means that potential customers who see the brand logo or hear the brand name can associate it with the branded product or service. Brand recognition is often the first step in establishing a brand’s position in the marketplace, and many agricultural cooperatives combine branded products with geographical indications to enable consumers to better remember the brand. Currently, there is a lack of consumer recognition and trust regarding green agricultural products [8]. Only a few consumers can recognize the benefits of green agricultural products with a high degree of greenness, which has a greater impact on the green brand recognition and word-of-mouth effect brought about by the repurchase rate of green agricultural products.
Even though the premium for green agricultural products is frequently two to three times that of conventional agricultural products and has a significant impact on consumers’ willingness to pay for such products [9], the supply of green agricultural products in China continues to fall short of consumer demand. Furthermore, it is imperative that the scarcity of green agricultural products be manifested not only in terms of quantity but also in terms of variety. This makes consumers face difficulties in choosing green agricultural products to meet their diversified needs.
Agricultural subsidies are a prevalent policy instrument employed by governments to provide assistance to the agricultural sector [10]. Agricultural subsidies can play a role in supporting the transition to healthier and more sustainable agricultural systems [11] and have emerged to promote green and sustainable agriculture globally [12]. Government subsidies generally take two forms, production subsidies for producers and consumption subsidies for consumers. Production subsidies are effective in increasing surplus throughout the agricultural supply chain and promoting green innovation among producers [13]. Consumer subsidies, on the other hand, can also increase consumer surplus but reduce producer surplus, ultimately leading some producers to choose to increase the price of agricultural products [14]. China has implemented numerous agricultural subsidy systems, encompassing resources and environmental protection subsidies, subsidies for agricultural infrastructure, subsidies for agricultural infrastructure, subsidies for agricultural production, subsidies for agricultural insurance, and subsidies for agricultural financial products [15]. Nevertheless, the existing subsidy mechanism for agricultural cooperatives in China exhibits several deficiencies. In the context of subsidies, production costs, and agricultural product quality, for instance, agricultural cooperatives consistently prioritize the acquisition of additional subsidies over the enhancement of operational productivity and agricultural product quality. To address the issues, rational government subsidy instruments are required.
Given the aforementioned context, this paper will address the following problem: Agricultural co-operatives face the problem of low yields in the production of green agricultural products. This has a serious impact on the willingness of agricultural cooperatives to produce green products, which ultimately leads to the production of green agricultural products that do not meet the needs of consumers who have the financial capacity to consume green products. Evolutionary game theory is a theory that combines the analysis of game theory with the analysis of the dynamic evolution process. It emphasizes a dynamic equilibrium. The theory originates from the theory of biological evolution, which has successfully explained some phenomena in the process of biological evolution. Nowadays, economists have made remarkable achievements in analyzing the factors influencing the formation of social habits, norms, institutions, or systems and explaining their formation process by using evolutionary game theory [16]. The EGT methodology allows modelling how strategies evolve over time in response to changing circumstances. Furthermore, unlike the completely rational hypothesis in traditional game theory, the stakeholders are finitely rational in adjusting their optimal options in a constantly repeated game rather than reaching optimality in a single game [17]. Ultimately, due to the complexity of stakeholder interactions in the process of green production by government-subsidized agricultural cooperatives, there is both cooperation and competition among them, such as the purchase by consumers of green agricultural products produced by agricultural cooperatives, which also involves adjustments in market demand and commodity prices. EGT methods can simulate how strategies evolve over time in response to changing circumstances.
As a result, this paper develops a tripartite model for determining government subsidies for agricultural products: consumers, agricultural cooperatives, and the government. The objective is to investigate thoroughly the interactive behavior and strategic choices of stakeholders in the green agricultural supply chain in different situations, and to explore how to promote the production of green agricultural products by agricultural cooperatives willing to produce green products through reasonable government subsidy strategies to obtain higher benefits, satisfy the demand for green agricultural products in the market, and help consumers buy green agricultural products at lower prices, so as to promote the sustainable development of the supply chain of green agricultural products and the protection of the ecosystem. Analogue experiments are utilized to conduct numerical simulations in order to validate the soundness of the deduced conclusions and to more intuitively illustrate the impact of the sensitivity of various factors. The experimental results are used to suggest some countermeasures for the green agricultural supply chain. Finally, the experimental results are used to suggest some countermeasures for green production in agricultural cooperatives under government subsidies.
In comparison to prior research, this article primarily contributes the following: first, we investigate the effect of incorporating brand recognition and the greenness of agricultural products into the green production model of government-subsidized agricultural cooperatives. The objective is to motivate agricultural cooperatives to enhance their profitability while concurrently considering the safety and quality of agricultural products. Furthermore, a significant portion of the scholarly literature concerning the ramifications of government incentives and disincentives posits that penalizing agricultural cooperatives for manufacturing conventional agricultural goods is warranted. However, in practice, traditional agricultural products remain the predominant sector output, and even the manufacturing of superior conventional goods continues to necessitate a certain degree of government support. Our study covers the case of subsidies to agricultural cooperatives that produce traditional agricultural products. In conclusion, government policymakers may gain valuable policy insights from our research. Appropriate subsidy ratios may increase the economic returns of agricultural cooperatives, encourage the production of green agricultural products by agricultural cooperatives, reduce the use of chemical fertilizers and pesticides, decrease consumer purchasing costs, and contribute to the maintenance of a healthy ecological environment, according to this study’s findings.
The remainder of this study is structured as follows. Section 2 reviews the relevant literature. Section 3 is the problem description, model assumptions, and construction of the evolutionary game model. Section 4 replicates the dynamic equations as well as the equilibrium point analysis. Section 5 shows the simulation analysis of the effect of sensitivity of different parameters. Section 6 contains the conclusions and insights of this paper.
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