An Optimal Subsidy Policy of Government by Considering Green Market Size and Consumer Valuations for Remanufactured Products
Date Issued
2011
Date
2011
Author(s)
Hsu, Jia-Lan
Abstract
As Green Supply Chain (GSC) has been given great attention and concerns, governments also start to implement policies for encouraging GSC to develop. However, governments usually ignore those consumers who buy remanufactured products while instituting a policy to subsidize or levy a tax on recyclers/remanufacturers. In view of this, the study investigates an optimal subsidy policy with governmental involvement in GSC that takes the green market size and consumer valuations for remanufactured goods into consideration.
For the government, the goal is to maximize social welfare. The government use subsidy tools to subsidize both producers and consumers in order to achieve push pull effect, which pushes producers to do the remanufacturing because of subsidies and pulls consumers back to buy remanufactured goods owing to cash rebates; in this way, the promotion of GSC is reached. This research builds two-stage game model under Bertrand duopoly, considering interaction between government and GSC members, to find the optimal subsidy policy through game theory and backward induction for government''s reference. In addition to producers, we are concerned with the demand issues such as green market and consumer valuation for remanufactured goods, thus investigating the effect of those factors on the optimal subsidy policy, social welfare, and total profits of GSC by numerical analysis.
The results show that the larger green market size is beneficial to the increase in social welfare, so government could obtain the better outcome of subsidizing from growing the number of green consumers; besides, this study finds that the optimal subsidy policy varies with consumer valuations, which reveals the importance of taking consumer valuations into account. In the end, the numerical analysis also shows that subsidizing both producers and consumers increases consumer surplus, which could avoid the whole amount of subsidy going to producers. It is expected that this study will help government implement better policies and further stimulate the development of GSC.
Subjects
Green Supply Chain
Subsidy
Game Theory
Consumer Valuation
Type
thesis
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