Abstract:  With the deepening of reform, the establishment of the rural development funding projects to promote agricultural development and protect farmers’ income is an effective way to solve the “issues relating to agriculture, rural areas and farmers”. Considering the adverse selection caused by information asymmetry in rural development funding, which leads to the low efficiency of the use of state funding and unreasonable allocation of resources, a signaling game model between application organizations and supporting organizations is established, and the relevant factors affecting the balanced selection mechanism of both parties are analyzed. It is found that “mixed equilibrium” and “separate equilibrium” appear in the game between applicants and the sponsors, and the equilibrium is influenced by the disguised cost and potential income of applicants. Therefore, an empirical study on the funding situation has been carried out, suggestions on increasing applicants’ disguised cost and potential income  are put forward, which can effectively reduce the false judgment rate of sponsors, guarantee the implementation of differentiated funding, improve the development enthusiasm of applicants, and guarantee the maximization of the funding efficiency and the rational resource allocation.

Key words: rural development funding, signaling game model, equilibrium, resource allocation