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When donors subsidize products for sale to low-income families, they need to address who to subsidize in the supply chain and to what extent, and whether such supply chain structures as retail competition, substitutable products, and demand uncertainty matter. Academic/practical relevance: By introducing and analyzing development supply chains in which transactions are commercial but subsidies are needed for affordability, we explore different supply chain structures, with product substitution and retail competition motivated by a field study in Haiti of subsidized solarlantern supply chains. Methodology: We incorporate product substitution, retail competition, and demand uncertainty in a threeechelon supply chain model with manufacturers, retailers and consumers. This model has transactions among the donor, manufacturers, retailers and consumers as a 4-stage Stackelberg game and we solve different variations of this game by using backward induction. Results: The donor can subsidize the manufacturer, retailer or the customer, as long as the total subsidy per unit across these echelons is maintained at the optimal level. Having more product choice and having more retail-channel choice can increase the number of beneficiaries adopting the products; this increase becomes more pronounced as demand becomes more uncertain. Managerial implications: Donors must coordinate across different programs along the entire supply chain. They should look for evidence in their collective experience for more beneficiaries when subsidizing competing retailers selling diverse substitutable products.

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This study seeks to conceptualize supply chains that use funding from large donors or governments for long‐term recovery following a disaster, or more generally, for economic development in a region. We call these development‐aid supply chains (DASC) distinct from commercial or humanitarian supply chains. With little available formally on DASCs in the literature, we carried out a field study across five solar lantern supply chains in Haiti set up for recovery following the massive 2010 earthquake. Stakeholder resource‐based view allowed us to use stakeholder theory, utility theory, and the resource‐based view in analyzing how these supply chains work. We observed how donor cash in these supply chains brings together global original equipment manufacturers; national‐level distributors; impact investors; microfinance institutions; retailers; and micro‐entrepreneurs. Many of these entities are social enterprises that bridge development‐minded donors with commercially oriented retailers and micro‐entrepreneurs. The result of these bridging efforts is the flow of goods, cash, and social impact data. Our conceptual model flags the problem that donor funding, while crucial for reducing deprivation in the short term, may increase the dependence on aid rather than reduce it.

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