LAUSR

Abstract China's straw power industry has been suffering from feedstock deficiency since the very beginning. Some local governments propose to offer price incentives to farmers or brokers on straw transaction activities. This paper aims to evaluate the impacts of such incentives and explore feasible ways for maximizing the potential positive effects. Both non-cooperative and cooperative game models are constructed for the members in a typical straw supply chain of China. The equilibrium decisions, payoffs, and social benefits are derived and compared analytically, while numerical experiments are set up for testing the analytical results and extending potential discussions. It is found that the incentives could not only enhance the straw transaction volume, but also benefit the straw supply chain members and the society. Meanwhile, the incentive effects are equal regardless of whether brokers or farmers act as the recipients. However, brokers may have larger bargaining power and grab more subsidizing benefits from farmers in the non-cooperative case. When the straw power plant works cooperatively with brokers, the subsidies may be shared equally and induce higher social benefits. In addition, the subsidies may work better when farmers have higher monetary sensitivity. It is thus suggested that the local governments should offer price incentives to either farmers or brokers on straw transaction activities and facilitate the cooperation between straw power plants and brokers. In particular, the governments should exert more incentive effort in relatively poor regions where farmers tend to be more monetary sensitive.