Journal of Economics and Financial Analysis, 8 (1), pp. 107-132, [2024]

Decision-making under Rice Contract and Non-Contract Farming Arrangements in Ekiti State, Nigeria: A Game Theory Approach



Farmers face considerable challenges in negotiating contracts, determining production levels, and fulfilling contractual obligations due to the inherent uncertainties associated with agricultural activities, including fluctuations in weather conditions, pest infestations, and crop diseases. Thus, this research delves into the decision-making processes within the rice farming sector in Nigeria, specifically examining the comparative profitability between contract and non-contract farming systems through Gross Margin analysis and the Maximax and Minima criteria.
Utilizing Ordinary Least Squares (OLS) technique on a randomly selected sample of 126 rice farmers from Ekiti State, Southwest Nigeria, our analysis reveals that rice farming in the region is economically viable, with contract farming demonstrating greater profitability compared to non-contract farming. The profitability of paddy rice cultivation is notably influenced by several factors, including farming experience, participation in cooperative associations, age, access to extension services, and agricultural training. Specifically, we observe that years of farming experience, membership in the association, and access to extension service positively influence profitability of paddy rice production of contracted farmers; while farmer age and formal training positively influence profitability of paddy rice production of non-contracted farmers.
Moreover, our study indicates that optimistic farmers are inclined towards adopting the contract farming model, while pessimistic farmers tend to favor non-contract arrangements. Thus, we recommend that optimistic farmers consider engaging in contract farming, while a non-contract approach is advisable for pessimistic rice farmers.



JEL Classification

Profitability; Rice Farming; Optimist; Pessimist; Maximax; Minima.

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