Sustainable Water Supply Chain Management Through Corporate-Oriented Water Rights Trading: An Application of an Evolutionary Game Model Under Imbalanced Water Quotas

Freshwater scarcity is emerging as a critical constraint on industrial clusters, production networks, and urban service systems, where water functions simultaneously as an essential production input and a shared regional resource. This study investigates how post-allocation water-quota imbalances in large inter-basin diversion systems can be addressed through adaptive secondary water rights trading. Focusing on China’s South-to-North Water Diversion Project (SNWDP), the research aims to explain under what institutional and efficiency conditions water rights trading can enhance corporate social responsibility, environmental management, and sustainable supply chain resilience. The study’s main innovation lies in the development of a corporate-oriented evolutionary game model that links water governance with corporate production, urban–industrial demand, and responsible supply chain management. Unlike conventional models, it incorporates bounded rationality, heterogeneous water-use efficiency, information asymmetry, transaction costs, primary allocation water pricing, and the risk of unrecovered basic water fees. Using a case inspired by the Zhengzhou–Nanyang transaction along the Middle Route of the SNWDP, the model simulates the strategic interaction between a water-rich node with surplus quota and a water-scarce node facing deficit demand. The findings show that a socially desirable Trade–Trade equilibrium emerges only when efficiency expectations and institutional conditions are favorable. Lower transaction costs and basic water prices, higher sunk-fee risk, and clearer efficiency differentials significantly increase trading willingness. The study demonstrates the practical value of transparent secondary water markets in improving allocative flexibility, reducing governance rigidity, and promoting more responsible and environmentally efficient regional water management.