Coordination of Agricultural Product Supply Chain with Consideration on Investment Subsidy Under the Strategy of Prospering Agriculture by Improving Quality

【Objective】Aiming at double marginalization and insufficient quality investment in the quality management of agricultural product supply chain, this paper probed into the quality coordination of the secondary agricultural product supply chain formed by the companies as the leading party of the supply chain and farmers households as the party that decides the quality level of agricultural products.【Method】 The equilibrium results of supply chain under the centralized decision and the supply chain decision under the traditional wholesale price contract were analyzed by dynamic game theory. On this basis, the quality investment subsidy contract was designed by using game theory and optimization theory. 【Result】It was found that both the optimal quality level and the total profit of the supply chain under the wholesale price contract were lower than those under the centralized decision. Under the investment subsidy contract, the optimal quality of agricultural products was equal to the quality under the centralized decision, the optimal price was positively correlated to wholesale price, and the optimal quality, optimal price, and the companys’profits were greater than the equilibrium results under wholesale price contract while the farmers’profits remained the same. It was also observed that, for the agricultural products with higher quality demand elasticity and lower quality investment coefficient, the higher profits could be gained by the company after adopting the investment subsidy contract.【Conclusion】 The supply chain of agricultural products under the investment subsidy contract can gain Pareto improvement compared with the wholesale price contract, and the investment in the quality of agricultural products will be better encouraged.