A Game Theory Approach in Long‐Term Strategy Selection in Biofuel Supply Chain

Abstract

The increasing growth in biofuel consumption induces further demand for different biomass feedstock. Competition for farmland use became an obstacle in producing biofuel since food products would be destined for energy rather than for human or animals. Nowadays, governments lay down regulations to encourage producing nonfood biomass which brought them huge costs. In this article, the long‐term behavior of parties is analyzed in a three player supply chain including farmers, biorefineries, and governments. The dynamic behavior of parties is modeled by using evolutionary game theory and the stable strategy of each party is derived by solving replicator dynamic equations. Finally, a numerical study is presented based on a real case in Iran to give a better understanding of the features of the game model. Sensitivity analyses on some key parameters such as price and governments' penalties leads to interesting managerial insights into long‐term strategies in the proposed supply chain. © 2019 American Institute of Chemical Engineers Environ Prog, 38:e13122, 2019