Game Theoretic Modeling of a Biofuel
Supply Chain in Existence of Incentives
to Promote Cellulosic Based Biofuel
Production
Amirsaman Hamzeh
Jaejin Jang
Industrial and Manufacturing Engineering
Introduction
Energy Security
and Global
Warming
Renewable
Energy
Promotion
Biofule
Production
• Renewable Fuel Standard (RFS) requires 36
billion gallons of biofuel by 2022.
• 21 billion gallons should be cellulosic based.
Introduction
Source: Yue et al., (2014)
Pros and Cons of Advanced Biofuel
Pros
Cons
No Competition with Food
Supply Chain
Lower Energy Content
Environmentally Friendly
More Expensive
Production Costs
GOVERNMENT’S SUPPORT
Research Questions
•How effective are incentive plans in stimulating
the cellulosic biofuel
How does a centralized supply chain differ in
performance compared with a decentralized one?
Problem Description
Farmer
p1
q1
Corn Based
Refinery (R1)
p2
q2
Cellulosic Based
Refinery (R2)
Results (Capacitated Farmer)
T=0
Policy
SC Char.
W=0
W=20
W=40
W=60
Ratio
Tot. Inc.(G)
Tot. Eth. ($)
PS ($)
CS ($)
CO2 ($)
Ratio
Tot. Inc.(G)
Tot. Eth. ($)
PS ($)
CS ($)
CO2 ($)
Ratio
Tot. Inc.(G)
Tot. Eth. ($)
PS ($)
CS ($)
CO2 ($)
Ratio
Tot. Inc.(G)
Tot. Eth. ($)
PS ($)
CS ($)
CO2 ($)
T=1.65
T=3.3
Dec.
Cent.
Dec.
Cent.
Dec.
Cent.
1.43
0
2,675
23,027
1,788
477
1.406
278
2,671
23,305
1,783
492
1.382
560
2,667
23,586
1,778
508
1.359
847
2,663
23,871
1,772
524
1.821
0
2,732
22,946
1,866
253
1.72
250
2,718
23,229
1,847
305
1.625
515
2,705
23,519
1,829
357
1.536
796
2,692
23,815
1,811
410
1.278
1,918
2,648
24,929
1,753
581
1.257
2,226
2,644
25,232
1,748
596
1.235
2,539
2,640
25,538
1,742
612
1.215
2,857
2,636
25,849
1,737
628
1.254
1,935
2,644
24,940
1,747
598
1.185
2,287
2,630
25,268
1,730
650
1.12
2,654
2,617
25,602
1,712
702
1.057
3,037
2,604
25,944
1,695
755
1.142
4,039
2,622
26,999
1,718
685
1.123
4,378
2,618
27,328
1,713
700
1.094
4,894
2,611
27,827
1,705
724
1.085
5,070
2,609
27,996
1,702
731
0.856
4,543
2,555
27,230
1,633
944
0.806
4,997
2,542
27,602
1,616
996
0.758
5,467
2,529
27,982
1,599
1,048
0.712
5,952
2,515
28,368
1,582
1,100
Results (Unapacitated Farmer)
T=0
Policy
SC Char.
W=0
W=20
W=40
W=60
Ratio
Tot. Inc.(G)
Tot. Eth. ($)
PS ($)
CS ($)
CO2 ($)
Ratio
Tot. Inc.(G)
Tot. Eth. ($)
PS ($)
CS ($)
CO2 ($)
Ratio
Tot. Inc.(G)
Tot. Eth. ($)
PS ($)
CS ($)
CO2 ($)
Ratio
Tot. Inc.(G)
Tot. Eth. ($)
PS ($)
CS ($)
CO2 ($)
T=1
T=1.5
Dec.
Cent.
Dec.
Cent.
Dec.
Cent.
0.857
0
2,795
18,420
1,953
1,030
0.833
386
2,834
18,927
2,007
1,075
0.81
793
2,871
19,448
2,061
1,120
0.788
1,221
2,909
19,448
2,061
1,119
0.848
0
4,139
20,589
4,283
1,543
0.812
578
4,196
21,159
4,401
1,631
0.779
1,195
4,252
21,747
4,520
1,719
0.748
1,849
4,309
22,354
4,641
1,807
0.767
1,668
2,947
20,534
2,172
1,209
0.747
2,136
2,985
21,099
2,228
1,253
0.728
2,624
3,023
21,679
2,285
1,298
0.71
3,134
3,064
22,274
2,343
1,342
0.719
2,540
4,365
22,979
4,764
1,894
0.691
3,269
4,422
23,624
4,888
1,982
0.665
4,035
4,478
24,287
5,014
2,070
0.64
4,838
4,535
24,969
5,141
2,157
0.728
2,625
3,023
21,679
2,285
1,298
0.71
3,134
3,061
22,273
2,342
1,342
0.692
3,663
3,099
22,882
2,401
1,387
0.676
4,212
3,137
23,507
2,460
1,432
0.665
4,035
4,478
24,287
5,014
2,070
0.64
4,838
4,535
24,969
5,141
2,157
0.617
5,679
4,591
25,669
5,270
2,245
0.595
6,558
4,648
26,388
5,401
2,332
Conclusion
• Without the existence of marginal lands on which the
farmer can grow corn or energy crop, subsidizing either
the farmer or R2 does not push the biofuel production
up as well as consumer surplus.
• Centralized channel is much more efficient than
Decentralized
• Effects of W and T are not the same and the subsidy
paid to R2 seem to be a more powerful lever than the
one paid to the farmer.
THANK YOU FOR YOUR
ATTENTION