Inter-Basin Water Transfer Supply Chain Equilibrium and Coordination: A Social Welfare Maximization Perspective

The dynamic interactions among the multiple stakeholders in an inter-basin water transfer (IBWT) supply chain from a social welfare maximization (SWM) perspective is rarely studied in the past. In this context, IBWT supply chain equilibrium and coordination decision models considering fairness concern under the scenarios without or with SWM goal are developed, analyzed and compared; the corresponding numerical analyses for all models are conducted and compared; and the public policy and practical implications are discussed. The research results indicate that: (1) Without SWM goal, the coordination strategy outperforms the equilibrium strategy regarding the supply chain performances, social welfare and consumer surplus for IBWT supply chain; (2) With SWM goal, the equilibrium strategy outperforms the coordination strategy regarding the supply chain performances for IBWT supply chain; however, the equilibrium strategy and the coordination strategy are consistent in terms of the corresponding social welfare and consumer surplus; (3) Subsidizing IBWT supply chain to pursue SWM goal would effectively improve the supply chain performance, the corresponding social welfare and consumer surplus, regardless of whether IBWT supply chain adopts the equilibrium or coordination strategy; (4) A conditional subsidy policy, i.e., the government only subsidizes IBWT supply chain adopting the coordination strategy, would effectively achieve SWM goal with less subsidy budget; (5) Fairness concern is beneficial for achieving an effective cooperation and creating a strong alliance between the local and the external suppliers within IBWT horizontal supply chain and helpful for the coordination of IBWT vertical supply chain.