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

Lingling Wang and Tsunemi Watanabe
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Lingling Wang: School of Economics and Management, Kochi University of Technology, 2-22 Eikokuji-cho, Kochi City, Kochi 780-8515, Japan
Tsunemi Watanabe: School of Economics and Management, Kochi University of Technology, 2-22 Eikokuji-cho, Kochi City, Kochi 780-8515, Japan

Energies, 2016, vol. 9, issue 6, 1-20

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.

Keywords: supply chain; biomass power plant; stackelberg game theory; perceived risk (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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