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Group Decision and Negotiation

, Volume 26, Issue 6, pp 1209–1230 | Cite as

Understanding Conflicting Interests of a Government and a Tobacco Manufacturer: A Game-Theoretic Approach

  • Md. Tanveer Ahmed
  • Jun Zhuang
  • Changhyun Kwon
Article
  • 165 Downloads

Abstract

Rice is the staple food of nearly half of the population of the world, most of whom live in developing countries. Ensuring a domestic supply of rice from outside sources is difficult for developing countries as less than 5% of the total world’s production is available for international trade. Hence, in order to ensure domestic food security, e.g., food availability and access, governments provide subsidies in agriculture. In many occasions, public money used for the subsidy goes toward promoting undesirable crops like tobacco. Although the strategic interaction between governments and manufacturers is critical, it has not been studied in the literature. This study fills this gap by considering a game between a government (of a developing country) and a tobacco manufacturer in which the government decides on a mix of subsidies and the tobacco manufacturer decides on declaring a purchasing price of tobacco. We provide a numerical study to show that controlling the output harvest price is more effective in reaching the desired end result for both the government and the tobacco manufacturer. A subsidy in fertilizer results in the measurable increase in the government spending but does not have significant effect in reaching the production target. The fertilizer subsidy should be provided only when the output price is too high to be affordable for the population.

Keywords

Farming Subsidy Food security Rice Tobacco Nash equilibrium 

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Copyright information

© Springer Science+Business Media Dordrecht 2017

Authors and Affiliations

  • Md. Tanveer Ahmed
    • 1
  • Jun Zhuang
    • 2
  • Changhyun Kwon
    • 3
  1. 1.Business AnalyticsDow AgroSciencesIndianapolisUSA
  2. 2.Department of Industrial and Systems EngineeringUniversity at BuffaloBuffaloUSA
  3. 3.Department of Industrial and Management Systems EngineeringUniversity of South FloridaTampaUSA

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