IDEAS home Printed from https://ideas.repec.org/a/eee/ecolec/v135y2017icp29-41.html
   My bibliography  Save this article

Using Game Theory to Resolve the “Chicken and Egg” Situation in Promoting Cellulosic Bioenergy Development

Author

Listed:
  • Luo, Yi
  • Miller, Shelie A.

Abstract

The Renewable Fuel Standard (RFS) requires production of cellulosic biofuel, such as ethanol produced from switchgrass. However, the bioenergy industry faces a well-established “chicken and egg” conundrum where biorefineries cannot be built until adequate farmers' participation in cellulosic biomass production is ensured; on the other hand, farmers will not commit to growing cellulosic biomass until a market is established. We assume that individual farmers in a future biofuel market are boundedly rational, and will endure the risk of growing switchgrass if they are likely to receive a better payoff in the future. After the number of switchgrass farmers reaches a certain threshold, sufficient biomass can be procured to build an economically viable biorefinery. If a biorefinery is built in a region, the reductions of logistics costs and economies of scale lead to the realization of a public good, and all farmers can be benefited from it; otherwise, the efforts of early switchgrass adopters could be unsuccessful. In this paper, an appropriate biorefinery capacity and the corresponding incentives provided to the farmers are determined by balancing the impact and the risk of the public good. Our incentive model is more efficient than a program that incentivizes all switchgrass growers equally.

Suggested Citation

  • Luo, Yi & Miller, Shelie A., 2017. "Using Game Theory to Resolve the “Chicken and Egg” Situation in Promoting Cellulosic Bioenergy Development," Ecological Economics, Elsevier, vol. 135(C), pages 29-41.
    • Handle: RePEc:eee:ecolec:v:135:y:2017:i:c:p:29-41
    DOI: 10.1016/j.ecolecon.2016.12.013
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0921800915304079
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ecolecon.2016.12.013?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Egbue, Ona & Long, Suzanna, 2012. "Barriers to widespread adoption of electric vehicles: An analysis of consumer attitudes and perceptions," Energy Policy, Elsevier, vol. 48(C), pages 717-729.
    2. Chen, Yan, 2008. "Incentive-compatible Mechanisms for Pure Public Goods: A Survey of Experimental Research," Handbook of Experimental Economics Results, in: Charles R. Plott & Vernon L. Smith (ed.), Handbook of Experimental Economics Results, edition 1, volume 1, chapter 67, pages 625-643, Elsevier.
    3. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Jürgen Schupp & Gert G. Wagner, 2011. "Individual Risk Attitudes: Measurement, Determinants, And Behavioral Consequences," Journal of the European Economic Association, European Economic Association, vol. 9(3), pages 522-550, June.
    4. Tavoni, Alessandro & Dannenberg, Astrid & Kallis, Giorgos & Löschel, Andreas, 2011. "Inequality, communication and the avoidance of disastrous climate change," LSE Research Online Documents on Economics 37570, London School of Economics and Political Science, LSE Library.
    5. David J. Cooper & John H. Kagel, 2005. "Are Two Heads Better Than One? Team versus Individual Play in Signaling Games," American Economic Review, American Economic Association, vol. 95(3), pages 477-509, June.
    6. Yan Chen & Fang-Fang Tang, 1998. "Learning and Incentive-Compatible Mechanisms for Public Goods Provision: An Experimental Study," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 633-662, June.
    7. Connel Fullenkamp & Rafael Tenorio & Robert Battalio, 2003. "Assessing Individual Risk Attitudes Using Field Data From Lottery Games," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 218-226, February.
    8. Jacob K. Goeree & Charles A. Holt, 2000. "An Explanation of Anomalous Behavior in Binary-Choice Games: Entry, Voting, Public Goods, and the Volunteers' Dilemma," Virginia Economics Online Papers 328, University of Virginia, Department of Economics.
    9. Luo, Yi & Miller, Shelie, 2013. "A game theory analysis of market incentives for US switchgrass ethanol," Ecological Economics, Elsevier, vol. 93(C), pages 42-56.
    10. Catherine C. Eckel & Philip J. Grossman, 2008. "Forecasting Risk Attitudes: An Experimental Study Using Actual and Forecast Gamble Choices," Monash Economics Working Papers archive-01, Monash University, Department of Economics.
    11. Pennings, Joost M. E., 2002. "Pulling the trigger or not: Factors affecting behavior of initiating a position in derivatives markets," Journal of Economic Psychology, Elsevier, vol. 23(2), pages 263-278, April.
    12. Gary Charness & Matthias Sutter, 2012. "Groups Make Better Self-Interested Decisions," Journal of Economic Perspectives, American Economic Association, vol. 26(3), pages 157-176, Summer.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Olszewski, Robert & Pałka, Piotr & Wendland, Agnieszka & Majdzińska, Karolina, 2021. "Application of cooperative game theory in a spatial context: An example of the application of the community-led local development instrument for the decision support system of biogas plants constructi," Land Use Policy, Elsevier, vol. 108(C).
    2. Burli, Pralhad & Lal, Pankaj & Wolde, Bernabas & Jose, Shibu & Bardhan, Sougata, 2019. "Factors affecting willingness to cultivate switchgrass: Evidence from a farmer survey in Missouri," Energy Economics, Elsevier, vol. 80(C), pages 20-29.
    3. Pulighe, Giuseppe & Bonati, Guido & Colangeli, Marco & Morese, Maria Michela & Traverso, Lorenzo & Lupia, Flavio & Khawaja, Cosette & Janssen, Rainer & Fava, Francesco, 2019. "Ongoing and emerging issues for sustainable bioenergy production on marginal lands in the Mediterranean regions," Renewable and Sustainable Energy Reviews, Elsevier, vol. 103(C), pages 58-70.
    4. Burli, Pralhad & Lal, Pankaj & Wolde, Bernabas & Jose, Shibu & Bardhan, Sougata, 2021. "Perceptions about switchgrass and land allocation decisions: Evidence from a farmer survey in Missouri," Land Use Policy, Elsevier, vol. 109(C).
    5. Dan Yu & Caihong Zhang & Siyi Wang & Lan Zhang, 2023. "Evolutionary Game and Simulation Analysis of Power Plant and Government Behavior Strategies in the Coupled Power Generation Industry of Agricultural and Forestry Biomass and Coal," Energies, MDPI, vol. 16(3), pages 1-19, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Klemens Keldenich & Marcus Klemm, 2011. "Double or Nothing!? Small Groups Making Decisions Under Risk in “Quiz Taxi”," Ruhr Economic Papers 0278, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    2. Masuda, Takehito & Okano, Yoshitaka & Saijo, Tatsuyoshi, 2014. "The minimum approval mechanism implements the efficient public good allocation theoretically and experimentally," Games and Economic Behavior, Elsevier, vol. 83(C), pages 73-85.
    3. repec:zbw:rwirep:0278 is not listed on IDEAS
    4. repec:dpr:wpaper:0874r is not listed on IDEAS
    5. Keldenich, Klemens & Klemm, Marcus, 2011. "Double or Nothing!? Small Groups Making Decisions Under Risk in ""Quiz Taxi""," Ruhr Economic Papers 278, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    6. David J. Cooper & Krista Saral & Marie Claire Villeval, 2021. "Why Join a Team?," Management Science, INFORMS, vol. 67(11), pages 6980-6997, November.
    7. Faralla, Valeria & Borà, Guido & Innocenti, Alessandro & Novarese, Marco, 2020. "Promises in group decision making," Research in Economics, Elsevier, vol. 74(1), pages 1-11.
    8. Zubanov, Nick & Cadsby, Bram & Song, Fei, 2017. "The," IZA Discussion Papers 10542, Institute of Labor Economics (IZA).
    9. Gantner, Anita & Horn, Kristian & Kerschbamer, Rudolf, 2019. "The role of communication in fair division with subjective claims," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 72-89.
    10. Hermansson, Cecilia, 2018. "Can self-assessed financial risk measures explain and predict bank customers’ objective financial risk?," Journal of Economic Behavior & Organization, Elsevier, vol. 148(C), pages 226-240.
    11. Luisa Menapace & Gregory Colson & Roberta Raffaelli, 2016. "A comparison of hypothetical risk attitude elicitation instruments for explaining farmer crop insurance purchases," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 43(1), pages 113-135.
    12. Leuermann, Andrea & Roth, Benjamin, 2012. "Does good advice come cheap? - On the assessment of risk preferences in the lab and the field," Working Papers 0534, University of Heidelberg, Department of Economics.
    13. Parrotta, Pierpaolo & Smith, Nina, 2013. "Female-Led Firms: Performance and Risk Attitudes," IZA Discussion Papers 7613, Institute of Labor Economics (IZA).
    14. Muminović Adnan, 2023. "Not Just Empty Rhetoric: The Economic Cost of Warmongering in a Post-Conflict Environment," South East European Journal of Economics and Business, Sciendo, vol. 18(2), pages 112-125, December.
    15. Silvester Van Koten & Andreas Ortmann, 2016. "Self-Regulatory Organizations under the Shadow of Governmental Oversight: An Experimental Investigation," Research in Experimental Economics, in: Experiments in Organizational Economics, volume 19, pages 85-104, Emerald Group Publishing Limited.
    16. Brandts, Jordi & Busom, Isabel & Lopez-Mayan, Cristina & Panadés, Judith, 2022. "Dispelling misconceptions about economics," Journal of Economic Psychology, Elsevier, vol. 88(C).
    17. Maria Karmeliuk & Martin G. Kocher & Georg Schmidt, 2022. "Teams and individuals in standard auction formats: decisions and emotions," Experimental Economics, Springer;Economic Science Association, vol. 25(5), pages 1327-1348, November.
    18. Alessia Isopi & Daniele Nosenzo & Chris Starmer, 2014. "Does consultation improve decision-making?," Theory and Decision, Springer, vol. 77(3), pages 377-388, October.
    19. Lamiraud, Karine & Vranceanu , Radu, 2015. "Group Gender Composition and Economic Decision-Making," ESSEC Working Papers WP1515, ESSEC Research Center, ESSEC Business School.
    20. Eckel, Catherine C. & Fatas, Enrique & Kass, Malcolm, 2022. "Sacrifice: An experiment on the political economy of extreme intergroup punishment," Journal of Economic Psychology, Elsevier, vol. 90(C).
    21. Dasgupta, Utteeyo & Mani, Subha & Sharma, Smriti & Singhal, Saurabh, 2016. "Eliciting Risk Preferences: Firefighting in the Field," IZA Discussion Papers 9765, Institute of Labor Economics (IZA).
    22. Bardey, David & De Donder, Philippe & Mantilla, César, 2019. "How is the trade-off between adverse selection and discrimination risk affected by genetic testing? Theory and experiment," Journal of Health Economics, Elsevier, vol. 68(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolec:v:135:y:2017:i:c:p:29-41. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolecon .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.