LAUSR

We consider a biofuel supply chain problem in which a farmer supplies two downstream refineries with nonidentical crops (corn and energy crop). The problem has been modeled as a multi leader single follower game to derive the farmer's decisions on land use as well as refineries' proposed prices to the farmer. We consider subsidizing the farmer and the refinery that uses the energy crop to study whether a subsidy plan can enhance the advanced biofuel production and meet the mandate of the Environmental Protection Agency (EPA). This mandate requires the production of 36 billion gallons of biofuel, out of which 21 billion gallons should be noncorn‐based biofuel. We solve the problem under four cases based on the willingness of the farmer to sell corn to the food market as well as the availability of land expansion for her. The Nash equilibrium is derived for all cases, and parametric analyses are used to study the effect of subsidies on the profit of the players and the total social welfare of the supply chain. We observe that a government's expenditure can be offset by the increase of the social welfare under certain circumstances. We find the minimum budget requirement to meet the EPA's mandate and show that a specific budget can be distributed in different ways while obtaining the same results.