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A game-based production operation model for water resource management: An analysis of the South-to-North Water Transfer Project in China
- Du, Wenyi, Fan, Yubing, Liu, Xiaojing, Park, Seong C., Tang, Xiaowo
- Journal of cleaner production 2019 v.228 pp. 1482-1493
- models, prices, supply chain, water management, water shortages, China
- To alleviate water shortage, several water transfer projects have been constructed in China. To further develop the supply chain management of water resources, the Eastern and Central Routes of China's South-to-North Water Transfer Project are considered as two water suppliers. The two suppliers provide water for two distributors in northern China. Based on a two-stage Stackelberg game, we develop a chain-to-chain competition model in three alternating scenarios including under wholesale price contracts, two-part pricing contracts and mixed pricing contracts, and derive the optimal pricing and ordering strategies. We find that each water supply chain member can earn a higher profit under the two-part pricing contract with appropriate parameters compared to that under the wholesale price contract. When the competition is weak, the performance of the supply chain subsystem under the two-part pricing contract is better than that under the wholesale pricing contract. On the contrary, when the competition is strong, the performance of the supply chain under the two-part pricing contract is lower than that under the wholesale price contract. With the two-part pricing contract used for both water supply chains, the two suppliers are in the prisoners' dilemma. The study expands the theory of supply chain management under competition and provides insights for the sustainability of water resource management.