Study on the price mechanism and the policies of government for integration a rice supply chain

The price mechanism among the nodes of a rice 3-stage supply chain is studied based on the threshold co-integration model. Firstly, the mechanism shows that there is a central market of rice origin. So there are long-term cointegration and short-term cointegration between the price in the central market and the other price origin and the price of processor respectively. There is a central market of polished rice in the place of processor. So there are long-term cointegration and short-term cointegration between the price in the central market and the price in the place of partly origin and the price in the place of wholesalers respectively. There is long-term cointegration, but short-term un-cointegration, between the price of rice and the price of polished rice in the place of processor. So the prices in the place of partly origin, processor and wholesalers can be forecasted in short-term by the threshold cointegration model. The mechanism presents the pricing basis for the nodes of the supply chain. Secondly, based on the mechanism, government regulation should be put on the price of rice in the place of origin and the price of polished rice in the place of processor highlight. The government intervene the unusual fluctuations of prices between the different markets which are not short-term cointegration. The intervention has threshold features. The government´s policies should regulate the system of the supply chain to promote the integration of the supply chain.