Dedicated asset investment and expropriation in agricultural integration an example of “corporation & farmer” mode

Dedicated asset investment boost up the inter-dependence of investment subjects, but it runs up the withdrawal cost and the possibility of opportunism appearance. This essay studies the game relationship and process between companies and farmers based on evolutionary game theory on the basis of the Cost-profit Analysis to different tactics in the “Corporation & Farmer” mode of agricultural integration. The conclusion shows that the companies and famers “both investing” or “neither of investing” in dedicated asset are the two evolutionary stable equilibrium states when there is lack of external supervision. However, the enthusiasm of them for investing is inhibited by the occupy behaviors and the percentage of occupy behaviors which are gradually decreasing while heightening the external supervision. Therefore, this essay calls for perfecting the laws and strengthening the intendance to ensure the mode functions well.