Water supply and consumption uncertainty: A conflict-equilibrium

Konstantin Kogan, Charles S. Tapiero

Research output: Contribution to journalArticle

Abstract

This paper addresses the economic efficiency of water production and distribution in a vertical supply chain consisting of a water-provider and a consumer (municipality). The inherent conflicts over stocks and supply costs that emerge among the parties in the water supply chain are modeled as a zero-sum stochastic differential game. Consequently, the effects of collaboration and competition are contrasted as well as the application of block pricing and subsidies in overcoming potential conflicts between the water-provider and the municipality subject to political risks of not meeting demands for water. The effect of uncertainty is elaborated as well. In particular, we show that when the supply variance depends on the mean supply, the effect of uncertainty depends on the intensity of the conflict between the municipality and the water-provider.

Original languageEnglish (US)
Pages (from-to)199-217
Number of pages19
JournalAnnals of Operations Research
Volume181
Issue number1
DOIs
StatePublished - Dec 2010

Keywords

  • Differential games
  • Supply chain
  • Water management

ASJC Scopus subject areas

  • Decision Sciences(all)
  • Management Science and Operations Research

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