Decision optimization for reclaimed water reuse under heterogeneous government subsidies in China

ABSTRACT Implementing certain government subsidies in the pricing of reclaimed water (RW) is conducive to enhancing its competitiveness. In this study, three subsidy methods – direct government subsidies to RW manufacturers (GC), credit-based subsidies to RW manufacturers (GE), and direct subsidies to RW users (GD) – were designed, and a Stackelberg game model was constructed to analyze how these three modes affect the operation strategies of RW manufacturers. The results show that RW price and social welfare have an ‘inverted U-shaped’ trend under three modes. GC and GE yield the same effects in terms of RW output, consumer surplus, profit of RW manufacturers, and social welfare; however, GC is more effective than GE in the short term. GC and GD differ significantly in channel improvement, with GC lowering RW prices to boost demand and GD increasing user utility to increase demand.