Selection of government subsidy policy for promotion based on the maximal social welfare
To stimulate consumption and improve social welfare,the government usually pro-vides subsidies to end customers.The most commonly adopted subsidy schemes are the trade-in subsidy scheme that targets old customers only and the consumption subsidy scheme that covers both new and old customers.We hence develop a game-theoretic model to capture the interac-tions among the government,the manufacturer,the retailer,and customers in a trade-in supply chain to examine whether the government should provide a trade-in or a consumption subsidy scheme.The results show that when the product durability is relatively low while the manu-facturing cost is sufficiently high,the trade-in subsidy scheme is better for the manufacturer,the retailer,the environment,and social welfare,although the corresponding total subsidy ex-penditure is increased.The consumption subsidy scheme is always better for new customers.In contrast,the trade-in subsidy scheme is better for old customers if the product durability is sufficiently low because the unit trade-in subsidy level is higher than the unit consumption sub-sidy level.Since the two subsidy schemes have their advantages and disadvantages for different stakeholders under different conditions,the government should trade off the economic benefits,environmental benefits,social welfare,and total subsidy expenditure to choose the suitable sub-sidy scheme.
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