Comparative analysis of some collection strategies for industrial buyers in agricultural biomass supply market

This research aims to shed light on the difference among three collection strategies for agricultural biomass, i.e. commitment strategy, pure competition strategy and vertical integration strategy. Firstly, the assumptions of biomass distribution, cost structure and market structure are applied to describe the agricultural biomass market, which helps deriving a monotonous increasing inverse demand function that is different from the past research. Secondly, commitment strategy, pure competition strategy and vertical integration strategy are modeled respectively with game theory to explore equilibrium quantities and profits. Thirdly, equilibrium quantities and efficiencies among the three collection strategies are compared to show the co-existence conditions of market structure and their differences. As results show, pure competition strategy is the most efficient among the three; commitment strategy brings the most aggregate biomass supply but is the most inefficient; vertical integration results in the most biomass supply security for integrated industrial buyer, though at the sacrifice of the profit for non-integrated industrial buyer.