Is It a Strategic Move to Subsidized Consumers Instead of the Manufacturer?

Abstract

Government organizations design and offer subsidy to achieve objectives such as ensuring positive environmental externalities, stimulating sustainable product consumption, improving social welfare. Motivated by two such pragmatic subsidy policies, consumers subsidy and manufacturer subsidy, we formulate parsimonious models under centralized and decentralized settings in a three-stage game framework to obtain a fair understanding about the circumstances under which it is beneficial for the government to subsidize consumers or manufacturer. The effect of two contract mechanisms, namely revenue sharing and green-marketing effort sharing contracts are examined to explore characteristics of supply chain decisions under subsidy. Our study reveals that the effectiveness subsidy program significantly depends on the participating member's intentions to further the cooperation. We find that consumers subsidy leads to an exceptional outcomes, total profits of the supply chain is always less when supply chain members cooperate with each other compared to decentralized setting. Profits for individual decreased considerably under both contract mechanisms. Government also reduces per unit subsidy to consumers. However, subsidy to manufacturer leads to higher profits when supply chain members cooperate. Amount of government subsidy is also higher. Consumers also receive higher quality products. Furthermore, both the contract mechanisms are able to generate Pareto-efficient scenario and higher social welfare of government. INDEX TERMS Supply chain management, game theory, contract mechanisms, government subsidies, green market, social welfare.

Modeling Formation and Operation of Collaborative Green Innovation between Manufacturer and Supplier: A Game Theory Approach

“…Incorporating the five key factors of trust level, initial knowledge input, development cost, knowledge complementarity, and collaborative innovation efficiency into the mathematical model, our model provides an explanation of the mechanisms through which the key factors affect decision-making of the collaborative green innovation, expressed as parameters, and puts forward an analytic tool for green innovation practitioners to understand how the important collaboration dynamics of the individual influencing factors are when making decision to form an collaboration in green innovation. While existing game models of collaboration are mainly built on the profit sharing basis between partners and thus have paid more attention to the monetary gains of the collaboration partners [10,12,17], our game model puts more emphasis on providing a mathematical tool for green innovation practitioners to understand how important the collaboration dynamics are when negotiating and progressing a CGI project and on generating collaborating outcomes of a partnership regarding mutual learning and innovation levels generated from CGI with regard to the assessed parameters such as trust, knowledge complementarity, product type, and innovation efficacy. Our simulation results demonstrate that while it is important for both collaboration parties of the manufacturer and supplier to receive profit, a focus only on the profit sharing is not enough, as the central purpose of CGI is to add green value both environmentally and financially to the product through collaborative innovation.…”

“…Prior studies have examined various issues with regard to facilitating and improving collaborative green innovation (CGI) between supply chain partners, such as optimizing supply chain power 2 of 20 structures [9], providing government subsidies to customers [10], and providing government incentives to the firms [11]. While the supply chain relationship evolves from purely market-based transactional behavior to the long-term collaborative partnership behavior, research attention regarding supplier chain relationship has gradually shifted from minimizing transaction costs and/or maximizing transaction profits to building long term collaborative partnership based on social exchange theory [4,[12][13][14].…”

The Impact of Consumer Subsidy on Green Technology Innovations for Vehicles and Environmental Impact

“…Research on consumer subsidy policy is the most related to our work [ 24 , 25 , 26 , 27 , 28 ]. Zhang et al [ 24 ] analyze the economic and environmental impacts of a consumer subsidy policy and find that the consumer subsidy program can always benefit the environment.…”

Integration of Operational and Marketing Tools With Time Delays: Is Cooperation Possible?

“…Hence, in order to offset the adverse effect undesirable to the manufacturer, he should increase his quality effort. Enlightened by [33]- [36], the demand rate D (t) is…”