Inter-Basin Water Transfer Green Supply Chain Equilibrium and Coordination under Social Welfare Maximization

The inter-basin water transfer (IBWT) projects have quasi-public-welfare characteristics, whose operations should take into account the water green level (WGL) and social welfare maximization (SWM). This paper explores the interactions between multiple stakeholders of an IBWT green supply chain through the game-theoretic and coordination research approaches considering the government’s subsidy to the WGL improvement under the SWM. The study and its findings complement the IBWT literature in the area of the green supply chain and social welfare maximization modeling. The analytical modeling results with and without considering the SWM are compared. A numerical analysis for a hypothetical IBWT green supply chain is conducted to draw strategic insights from this study. The research results indicate that (1) If the SWM is not considered, coordination strategy could effectively improve the operations performances of the IBWT supply chain and its members, the consumers’ surplus, and the social welfare when compared with the equilibrium strategy; (2) If the SWM is considered, the IBWT green supply chain and its members have a strong intention to adopt the equilibrium strategy to gain more profits, while the government has a strong intention to encourage the IBWT green supply chain and its members to adopt the coordination strategy to maximize social welfare with a smaller public subsidy; (3) The government’s subsidy policy should be designed and provided to encourage the IBWT green supply chain and its members to improve WGL and pursue the SWM, and a subsidy threshold policy can be designed to maximize social welfare with a lower subsidy budget: only when the IBWT green supply chain and its members adopt the coordination strategy can they get a subsidy from the government.