Volume 29, Issue 4, 2020
DOI: 10.24205/03276716.2020.861
Investigating the Effects of Government Subsidies on Manufacturers and Remanufacturers in Green Economy- Based on Two-Period Game Theory
Abstract
Under resource constraints and environmental degradation, remanufacturing industry has been increasingly promoted to fasten Green Economy and sustainable growth of the whole society, which require government subsidies. While the quantitative influence and the allocation of the subsidies are still uncertain. To help the government maximize the utility of these subsidies, it seems necessary to measure the outcomes in different cases, and the observation period should be expanded. Based on these and our prior research of their relationship, a two-period game model between manufacturers and remanufacturers is established, which shows their entrance orders. The three cases-a case without subsidies, a case with subsidies for the remanufacturer, and a case with subsidies for the consumer who selects the remanufactured product are compared based on this dynamic game model. The results indicate that government subsidies promote lower retail prices for both products; remanufactured products have greater price reductions when governments subsidize the remanufacturer, and brand-new products exhibit lower prices after consumer subsidies; vicious competition may occur if the government over-subsidizes consumers because brand-new product manufacturers will adopt a cut-throat strategy to compete with the lower-priced remanufactured products to survive the competition. Government subsidies cannot exceed the value of A/2 and recovery rate should be proper. By having clear view of these results, government subsidies will produce optimal economic outcomes for remanufacturing industry
Keywords
game theory; government subsidies; remanufacturing; Green Economy; Sustainability