Two-part pricing contract and competition between two water supply chains: a theoretical and empirical analysis of the South-to-North Water Transfer Project in China

Focusing on the established Eastern and Middle Routes of the South-to-North Water Transfer Project in China, this study investigates two water supply chains with each consisting of one water supplier and one water distributor. This research studies the performance of the water supply chain system and supply chain members under two-part pricing contracts and wholesale price contracts, with varying competition intensity and rainfall use efficiency levels. The results show the parameters of water supply chain members and the whole system decrease as the competition intensity increases. Water suppliers can change the expected profits of water supply system and members through changing the fixed costs in a certain range. When the quantity competition between the distributors is weak, the parameters of water supply chain decrease as the average rainfall increases. When the quantity competition is strong, the parameters also decrease as the average rainfall increases, but the decreasing range is much larger than that for the weak competition. Similarly, the range of fixed cost is much larger when the quantity competition is stronger than that for the weak competition.