Two-stage Green Supply Chains Considering the Impact of Dynamic Subsidy Rates

Nowadays, more and more companies are investing in the development and production of environmentally friendly products. This paper investigates a dynamic pricing strategy and a dynamic subsidization strategy for a two-stage green supply chains containing a manufacturer and a retailer under both centralized decision-making scenario and decentralized decision-making scenario and investigates the investment behavior of manufacturer and the pricing behavior of retailer. We find that not only does centralized decision-making allow for greater efficiency at lower prices, but it also reduces government efforts to induce manufacturers to produce environmentally friendly goods. Firms also have more incentive to introduce discounts when price reductions can better attract consumers, which allows firms to reserve space for price reductions by raising the initial price of the product and gain profit by this way. However, when consumers are more interested in the current price of a product, the room for price cuts is therefore limited, which highly constrain the capacity of obtaining benefits for the companies who produce green products. This means that the government should choose the suitable time period to provide subsidies in order to maximize the effectiveness of the subsidies, and at the same time companies should choose whether or not to offer promotions based on the type of customer.