A Stackelberg Game Theoretic Analysis of Incentive Effects under Perceived Risk for China’s Straw-Based Power Plant Supply Chain

Lingling Wang*, Tsunemi Watanabe*

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

17 Citations (Scopus)
14 Downloads (Pure)

Abstract

The rapid expansion of the biomass power generation industry has resulted in the conversion of substantial agricultural waste (crop straw) into energy feedstock, thereby increasing the income of farmers and promoting the development of rural areas. However, the promising industry faces financial deficits because of difficulties in collecting straw from farmers. To determine strategies for overcoming the biomass supply problem, we apply Stackelberg game theory in modeling the Chinese biomass supply chain and design incentive scenarios under stakeholder risk perception. We illustrate the proposed methodology through an empirical case study on China and demonstrate the effects of incentives on farmers and middlemen. Results show that with incentives, straw quantity and stakeholder profit are expected to increase. Incentives exert a particularly remarkable effect on farmers, with such inducements producing the highest social welfare. Moreover, perceived risk dramatically affects stakeholder profit. Mitigating the risk perception of farmers is expected to significantly advance the development of the biomass power generation industry, increase stakeholder profit, and decrease the amount of incentives needed.

Original languageEnglish
Article number455
Pages (from-to)1-20
Number of pages20
JournalEnergies
Volume9
Issue number6
DOIs
Publication statusPublished - 14 Jun 2016
Externally publishedYes

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