Abstract: To solve the defaulting problem in contract-farming supply chain and reduce the default rate of agricultural contract, game theory is used to model the trading process and default mechanism. Taking backward induction, the optimal purchase price and quantity are obtained. The profit distribution and behavior selectionunder different models also are discussed. It is found that the contract design in the decentralized decision-making model is beneficial to the farmers, and the company is not favored and has the risk of default. The contract design under the Nash negotiation model is beneficial to both sides, and neither of them breaches the contract. The supply chain can reach a steady state. The overall profit of the supply chain under the Nash negotiation model is greater than the overall profit of the supply chain under the decentralized decision-making model, and is equal to the supply chain profit under centralized decision-making model. The model can achieve the perfect coordination of the supply chain.

Key words: expected profit, centralized decision-making, decentralized decision-making, Nash negotiation