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Sustainability 2016, 8(12), 1290; doi:10.3390/su8121290

Analysis of Supply Chain under Different Subsidy Policies of the Government

1
School of Management, Nanchang University, Nanchang 330031, China
2
School of Economics and Management, Nanchang University, Nanchang 330031, China
*
Author to whom correspondence should be addressed.
Academic Editor: Ilkyeong Moon
Received: 18 August 2016 / Revised: 26 November 2016 / Accepted: 5 December 2016 / Published: 9 December 2016
(This article belongs to the Special Issue Sustainability in Supply Chain Management)
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Abstract

The increasing public attention on green products prompted firms and government to focus on the design and manufacturing of these products. This study focuses on a supply chain system that consists of three members, namely, supplier, manufacturer, and government, and then investigates the effects of government subsidies on social welfare and the profits of supply chain members. We utilize game and optimization theories to calculate and compare the optimal decisions and profits of players in the following scenarios: (i) the government provides a subsidy rate to the cost of manufacturer’s greenness efforts (first subsidy policy); and (ii) the government grants a per unit subsidy to the manufacturer for the demand for green product (second subsidy policy). We also derive the necessary condition for the most effective subsidy policy that maximizes expected social welfare and profits. Our analysis derives the following findings: (i) under the first subsidy policy, the government tends to provide high subsidy rate to a manufacturer with low marginal profit; (ii) under the second subsidy policy, the government tends to offer low subsidy to a manufacturer with low marginal profit; and (iii) a government’s selection of subsidy policy depends on the sensitivity of consumers to price. View Full-Text
Keywords: supply chain; social welfare; subsidy; green efforts; game theory supply chain; social welfare; subsidy; green efforts; game theory
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Guo, D.; He, Y.; Wu, Y.; Xu, Q. Analysis of Supply Chain under Different Subsidy Policies of the Government. Sustainability 2016, 8, 1290.

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