Numerous studies of land use, food prices, environmental impact and more have fed the so-called “food versus fuel” debate. Yun Bai, Yanfeng Ouyang, and Jong-Shi Pang, University of Illinois at Urbana-Champaign, USA, say that most studies so far have overlooked a key factor: selfish and possibly competing interests of the biofuel industry and individual farmers, who independently seek the most profit from their crops.

They propose game-theoretic models that incorporate farmers’ decisions on land use and market choice into the biofuel manufacturers’ supply chain design problem. A noncooperative bi-level Stackelberg leader–follower game model and a cooperative game model are developed respectively to address possible business partnership scenarios between feedstock suppliers and biofuel manufacturers. The models determine the optimal number and locations of biorefineries, the required prices for these refineries to compete for feedstock resources, as well as farmers’ land use choices between food and energy.
The researchers applied the models to various business scenarios; for example, farmers cooperating with the biofuel industry through farmland leasing or acquisition. The estimated improvement in overall system profit can provide guidelines for how much effort stakeholders should invest to achieve such business scenarios.

The researchers will continue to refine their models, adding additional considerations such as environmental impact, production fluctuations, land-use diversity and crop rotation.

• Biofuel supply chain design under competitive agricultural land use and feedstock market equilibrium,
  Yun Bai, Yanfeng Ouyang, Jong-Shi Pang,
  Energy Economics 2012.
  DOI: 10.1016/j.eneco.2012.01.003