Research on the Biomass Power Contract of “Company +Farmer” Under Default Risk

Abstract

We research the biomass power generation problem in the perspective of farmer contracting supply chain. By establishing a mathematical model and under the random yield and demand, a multiple farmer contract with a biomass power generation company problem in a two-level supply chain is researched in this paper. We propose different mechanisms in two situations: under default risk and no default risk. And compare the optimal decision in different contracts. We find that the famers’ optimal input amount is always linear to the company’s order quantity; The company and farmers’ optimal decision quantity will both be improved under no default risk. However, the optimal input quantity by farmers will decrease with the increases of the compensation ratio in this situation.