A sustainable vegetable supply chain using plant factories in Taiwanese markets: A Nash-Cournot model

Sustainable plant factory systems are able to provide steady and high-quality plants to markets while using less labor, water, nutrition, and pesticides. A plant factory is a controlled environment for plant production systems with artificial light, temperature, humidity, carbon dioxide, water supply, and cultivation solution. This paper focuses on the entry and competition of a plant factory supply chain in vegetable markets, using a Nash-Cournot model to simulate this competition. The Lagrangian multiplier method is used to derive KKT optimality conditions for the model. Combining the optimality conditions yields a linear complementarity problem (LCP), which is solved by GAMS and PATH. A case study of the plant factory supply chain in nine Taiwanese vegetable markets is presented. The research simulates the impact of the location of plant factories, number of firms, and different market demands. The results show that total production and profits of the plant factory supply chain increase as transportation costs decrease. In addition, the producer surplus, consumer surplus, and total surplus of the plant factory supply chain in Taiwanese markets improve when factories are located close to the markets. A sensitivity analysis is conducted which shows the impact of market share and production cost on the plant factory supply chain. While the case study focuses on the Taiwanese agricultural commodity production, the methodology and analysis procedures have generalizability to similar plant production industry problems in other contexts.