Profit allocation in collaborative bioenergy and biofuel supply chains

Evelyn Gao, Taraneh Sowlati and Shaghaygh Akhtari

Energy, 2019, vol. 188, issue C

Abstract: In this paper, the profit allocation problem, which was overlooked in the collaborative bioenergy and biofuel supply chain literature, is considered. The optimization model for the strategic and tactical planning of a bioenergy and biofuel supply chain is modified and a number of cooperative game theory allocation methods are evaluated for a case study of collaboration among three potential bioconversion facilities in British Columbia, Canada. Moreover, a sensitivity analysis is conducted to evaluate the stability of the methods with changes in parameters. The results show that the collaboration of three bioconversion plants would generate the highest profit compared with other coalitions. Based on the results, the savings from collaboration could improve the total net present value by 5%. The results highlight that the profitability and stability of collaboration are closely related to bio-oil market prices and demand. The proportional allocation methods hardly generate stable (efficiency and individual rationality) results. Therefore, caution should be taken about the frequent use of proportional methods for costs/benefits allocation by the industry. Instead, the nucleolus and equal profit methods are recommended as alternative methods since they are always stable regardless of variations in model parameters, such as bioproduct demand and prices.

Keywords: Optimization; Forest-based biomass; Supply chain collaboration; Game theory; Cost/profit allocation (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:188:y:2019:i:c:s0360544219317074

DOI: 10.1016/j.energy.2019.116013

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