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Social welfare maximization with the least subsidy: Photovoltaic supply chain equilibrium and coordination with fairness concern

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  • Chen, Zhisong
  • Ivan Su, Shong-Iee

Abstract

This study attempts to fill the literature gaps in the PV supply chain studies to understand better the effective equilibrium and coordination mechanisms in a PV supply chain with the fairness concern under the government subsidy policy and how an optimal subsidy factor is determined to achieve the social welfare maximization goal. Considering the government subsidy and the fairness concern of the core supply chain members, four basic game-theoretical model types (i.e. MS-leader Stackelberg Game, PA-leader Stackelberg Game, Nash Game and Revenue Sharing Contract) are formulated to study and compare the effects on the solutions and the performances by undertaking either an equilibrium or a coordination supply chain strategy. A total of 16 models are developed for the analytical and numerical studies with the findings and results complementing each other. It is found that a conflicting goal exists between the public sector and the private sector to develop a larger and healthier PV industry. A coordinated supply chain, theoretically, would perform better than an equilibrium supply chain since a coordination strategy in a PV supply chain allows the maximization of the social welfare using the least public subsidy and, simultaneously, generates many more supply chain profits for the PV supply chain comparing to the profits earned by those supply chain strategies without any subsidy. Smart and proper policies to resolve the conflict between the public and the private sectors are still very deficient and need more practical investigations.

Suggested Citation

  • Chen, Zhisong & Ivan Su, Shong-Iee, 2019. "Social welfare maximization with the least subsidy: Photovoltaic supply chain equilibrium and coordination with fairness concern," Renewable Energy, Elsevier, vol. 132(C), pages 1332-1347.
  • Handle: RePEc:eee:renene:v:132:y:2019:i:c:p:1332-1347
    DOI: 10.1016/j.renene.2018.09.026
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    3. Nili, Maryam & Seyedhosseini, Seyed Mohammad & Jabalameli, Mohammad Saeed & Dehghani, Ehsan, 2021. "A multi-objective optimization model to sustainable closed-loop solar photovoltaic supply chain network design: A case study in Iran," Renewable and Sustainable Energy Reviews, Elsevier, vol. 150(C).
    4. Zhisong Chen & Keith C. K. Cheung & Xiangtong Qi, 2021. "Subsidy policies and operational strategies for multiple competing photovoltaic supply chains," Flexible Services and Manufacturing Journal, Springer, vol. 33(4), pages 914-955, December.
    5. Lijie Wang, 2022. "Food Supply Chain Sustainability Strategy for Fresh Retailer and Multi-Output Random Fresh Suppliers after COVID-19," Sustainability, MDPI, vol. 15(1), pages 1-15, December.
    6. Maria A. Franco & Stefan N. Groesser, 2021. "A Systematic Literature Review of the Solar Photovoltaic Value Chain for a Circular Economy," Sustainability, MDPI, vol. 13(17), pages 1-35, August.
    7. Jian Xue & Ruifeng Gong & Laijun Zhao & Xiaoqing Ji & Yan Xu, 2019. "A Green Supply-Chain Decision Model for Energy-Saving Products That Accounts for Government Subsidies," Sustainability, MDPI, vol. 11(8), pages 1-17, April.
    8. Yu, Vincent F. & Le, Thi Huynh Anh & Gupta, Jatinder N.D., 2023. "Sustainable microgrid design with peer-to-peer energy trading involving government subsidies and uncertainties," Renewable Energy, Elsevier, vol. 206(C), pages 658-675.
    9. Zhao, Jing & Zhang, Qin, 2021. "The effect of contract methods on the lead time of a two-level photovoltaic supply chain: revenue-sharing vs. cost-sharing," Energy, Elsevier, vol. 231(C).
    10. Ruifeng Gong & Jian Xue & Ruli Liu & Jinhua Zhou & Laijun Zhao, 2022. "A closed‐loop supply chain decision model considering corporate social responsibility and value‐added services," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 1704-1720, September.
    11. Sun, Ya-Fang & Zhang, Yue-Jun & Su, Bin, 2022. "Impact of government subsidy on the optimal R&D and advertising investment in the cooperative supply chain of new energy vehicles," Energy Policy, Elsevier, vol. 164(C).
    12. Guo, Zhongjie & Wei, Wei & Chen, Laijun & Zhang, Xiaoping & Mei, Shengwei, 2021. "Equilibrium model of a regional hydrogen market with renewable energy based suppliers and transportation costs," Energy, Elsevier, vol. 220(C).
    13. Tsao, Yu-Chung & Thanh, Vo-Van & Chang, Yi-Ying & Wei, Hsi-Hsien, 2021. "COVID-19: Government subsidy models for sustainable energy supply with disruption risks," Renewable and Sustainable Energy Reviews, Elsevier, vol. 150(C).
    14. Wang, Dan-Yi & Wang, Xueqing & Ding, Ru-Xi, 2022. "Welfare maximization with the least subsidy: Pricing model for surface water loop heat pump PPP projects considering occupancy rate growth and coefficient of performance," Renewable Energy, Elsevier, vol. 194(C), pages 1131-1141.

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