Waste cooking oil-to-energy under incomplete information: Identifying policy options through an evolutionary game

The policies concerning waste cooking oil-to-energy supply chains are urgently needed in China. This is because, in practice, there is a real risk of raw material supply being interrupted. Given that the various participating entities are often unable to accurately estimate either their own revenue stream or costs, or the actions of other stakeholders, this paper builds an evolutionary game to model three parties including the government, biofuel enterprises and restaurants under the assumptions of incomplete information and bounded entity rationality, and investigates supply chain policy options. Results indicate that the strategy choices of the various parties (dominance, treatment and participation) are merely in equilibrium for the time being. In the long run, however, there will be one of two equilibrium states: either all three players withdraw from supply chain operation or biofuel enterprises and restaurants eventually take an active part in reverse supply chain management without government intervention. To attain this long-term goal, governments should eliminate the garbage disposal fees levied on restaurants, while, at the same time, increase quantity-based subsidies to biofuel enterprises. Cracking down on restaurants that privately sell waste cooking oil to illegal peddlers should be regarded as a long-term task. Therefore, in either equilibrium state, restaurants should always be the focus of attention.