Optimal Pricing and Coordination Schemes for the Eastern Route of the South‐to‐North Water Diversion Supply Chain System in China

Wang, Huimin; Chen, Zhisong; Su, Shengqun

doi:10.5325/transportationj.51.4.0487

Cited by 16 publications

(4 citation statements)

References 6 publications

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“…Ballestero (2004) proposed a decision stochastic approach to determine quantity and price by simulating the recipient’s demand curve and the donor’s supply curve for transferable water [26]. Wang et al (2012) studied the pricing and coordinating schemes for IBWT supply chain management [5]. Chen et al (2012a) developed a model with centralization/decentralization decision-making to investigate the coordination mechanism via revenue-sharing [27].…”

Section: Literature Reviewmentioning

confidence: 99%

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Inter-Basin Water Transfer Supply Chain Coordination with Ramsey Pricing

Chen

Cheung

Tan

2019

IJERPH

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Often enough, social welfare and private benefit do not align for quasi-public goods/services. The inter-basin water transfer (IBWT) project provides a vivid example of this. In this paper, following the game-theoretical approach, we derive an optimal Ramsey pricing scheme to resolve these conflicts. We try to compare traditional supply chain management models with an optimal Ramsey pricing scheme, with an enforcement of coordination among firms. Using simulation techniques, we compute numerical estimates under three regimes: a standard equilibrium decision framework, a coordination decision model and a coordinated Ramsey pricing scheme. Our results show the relative welfare impact of different settings, revealing that the optimal pricing scheme based on the two-part tariff structure cannot only improve social welfare, but also ensure a target profit for participating firms. Lastly, our findings have strong policy implications for the government with profit regulation and the control of water resources.

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Section: Literature Reviewmentioning

confidence: 99%

“…The existing literature has not explored the strategic aspects of IBWT from a supply chain management perspective. Only a few papers can be found pursuing different directions such as the interactive behavior [5] and the bargaining strength [6,7] among players.…”

Section: Introductionmentioning

confidence: 99%

Inter-Basin Water Transfer Supply Chain Coordination with Ramsey Pricing

Chen

Cheung

Tan

2019

IJERPH

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“…Chen et al (2013) applied a two-tier pricing scheme to balance water allocation by using a Stackelberg game model for the eastern route of SNWD project, and they concluded that the two-tier pricing scheme is an effective method that can integrate government control and market powers to ensure both the public interest and economic benefits [32]. Wang et al (2012) studied the pricing and coordinating schemes of the eastern route of SNWD project and discussed the analytical results and their policy implications for the eastern route of SNWD water-resource supply chain [33]. Chen et al (2012a) developed a decentralized decision model and a centralized decision model with strategic customer behavior using a floating pricing mechanism to construct a coordination mechanism via a revenue-sharing contract [34].…”

Section: Literature Reviewmentioning

confidence: 99%

Inter-Basin Water Transfer Green Supply Chain Equilibrium and Coordination under Social Welfare Maximization

Chen

Pei

2018

Sustainability

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Abstract:The inter-basin water transfer (IBWT) projects have quasi-public-welfare characteristics, whose operations should take into account the water green level (WGL) and social welfare maximization (SWM). This paper explores the interactions between multiple stakeholders of an IBWT green supply chain through the game-theoretic and coordination research approaches considering the government's subsidy to the WGL improvement under the SWM. The study and its findings complement the IBWT literature in the area of the green supply chain and social welfare maximization modeling. The analytical modeling results with and without considering the SWM are compared. A numerical analysis for a hypothetical IBWT green supply chain is conducted to draw strategic insights from this study. The research results indicate that (1) If the SWM is not considered, coordination strategy could effectively improve the operations performances of the IBWT supply chain and its members, the consumers' surplus, and the social welfare when compared with the equilibrium strategy; (2) If the SWM is considered, the IBWT green supply chain and its members have a strong intention to adopt the equilibrium strategy to gain more profits, while the government has a strong intention to encourage the IBWT green supply chain and its members to adopt the coordination strategy to maximize social welfare with a smaller public subsidy; (3) The government's subsidy policy should be designed and provided to encourage the IBWT green supply chain and its members to improve WGL and pursue the SWM, and a subsidy threshold policy can be designed to maximize social welfare with a lower subsidy budget: only when the IBWT green supply chain and its members adopt the coordination strategy can they get a subsidy from the government.

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“…Chen and Wang [42] combined the Eastern Route with the engineering practice of water resources supply chain system, established a quasi-market using a Newsvendor optimizing production model, and put forward the corresponding policy suggestions regarding the eastern water supply chain system. Wang et al [43] studied the optimization of pricing and proposed an optimized coordination scheme in the Eastern Route supply chain. Chen et al [44] studied the pricing mechanism of the SNWDP in a stable environment.…”

Section: Water Pricing and Decision Strategies In Snwdpmentioning

confidence: 99%

Pricing Strategies for Competitive Water Supply Chains under Different Power Structures: An Application to the South-to-North Water Diversion Project in China

Fan²,

Yan

2018

Sustainability

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Abstract:Under two different power structures, where the supplier and the distributor, respectively, are modeled as the leader, this paper studies water pricing strategies in two competing water resources supply chains. We assume that each water supply chain consists of a risk-neutral water supplier and a risk-neutral water distributor. We build different decision models for two competitive water resources supply chains, derive the optimal decision strategies for the water supply chain members, and analyze how competition intensity affects these decisions. Analytical results show that when the supplier is the leader, its water wholesale price is always higher than that when the distributor serves as the leader. On the other hand, the retail price and the two supply chains' channel profits depend on the competition intensity, but are independent of the power structure. To illustrate the proposed models, we apply them to examine the water pricing strategies in the South-to-North Water Diversion Project in China. The results showed significant insights into the pricing strategies of water resources in different routes of this massive water diversion project.

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Optimal Pricing and Coordination Schemes for the Eastern Route of the South‐to‐North Water Diversion Supply Chain System in China

Cited by 16 publications

References 6 publications

Inter-Basin Water Transfer Supply Chain Coordination with Ramsey Pricing

Inter-Basin Water Transfer Supply Chain Coordination with Ramsey Pricing

Inter-Basin Water Transfer Green Supply Chain Equilibrium and Coordination under Social Welfare Maximization

Pricing Strategies for Competitive Water Supply Chains under Different Power Structures: An Application to the South-to-North Water Diversion Project in China

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