A Game-Theoretic Approach for Pricing in a Sustainable Supply Chain Considering Governmental Intervention and Water Rebound Effect: A Case Study of Iranian Food Products

Articles in Press

Document Type : Article

Authors

1 Department of Industrial Engineering, Department of Industrial and Systems Engineering, Isfahan University of Technology, Isfahan, Iran

2 Department of Industrial and Systems Engineering, Isfahan University of Technology, Isfahan, Iran

3 Isfahan University Of Technology

10.24200/j65.2024.63648.2385

Abstract

Escalating freshwater depletion and contamination driven by anthropogenic activities pose a significant threat to global water accessibility, jeopardizing food security, environmental integrity, and economic prosperity. The dearth of water resources worldwide and the significance of the negative effects of wastewater pollution on the environment have promoted the discussion of water and wastewater treatment in the supply chain in this research. To create a sustainable supply chain, a subsidy has been proposed to encourage the producer to treat wastewater. The subsidy will be determined by the government. Wastewater generated during the production process undergoes treatment and is subsequently marketed for reuse within the supply chain. Wastewater treatment coupled with the reuse of treated wastewater in the supply chain effectively reduces freshwater consumption. Subsequently, the green manufacturer determines the selling price of each green product unit by considering the cost of wastewater treatment, the rise in fresh water consumption due to the rebound effect, and the impact of the amount of government subsidy for wastewater treatment. Given the concurrent roles of the government and the green producer within this domain and the impact of their decisions on each other, the game theory approach has been employed for the first time for pricing the green product under the mentioned conditions. This holistic approach offers a more realistic appraisal of freshwater consumption in production and paves the way for formulating effective water management strategies towards sustainable production. In this study, the designed game has been solved under two structures, namely Nash and Stackelberg. A parametric analysis of the parameters of the problem is conducted. A real-life case study from food industry of Iran is solved. The analysis of the results revealed that wastewater treatment for both the government and the green producer as players in both structures generally yield higher profits than not treating wastewater.

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Sharif Journal of Industrial Engineering & Management

Articles in Press, Corrected Proof
Available Online from 23 July 2024

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