Impact of differentiated green incentive policies on traditional and certified green product markets

Jingzhe Gao and Haixiao Wei

International Review of Financial Analysis, 2025, vol. 106, issue C

Abstract: Amid escalating environmental challenges, green manufacturing processes within enterprises increasingly require external incentives. Historically, such incentive policies have primarily focused on the supply side of green manufacturing, often neglecting the demand-side pull effect. Moreover, the effectiveness of green incentive policies differs markedly between traditional green products and third-party certified green-label products due to distinct corporate-government interaction structures. This study investigates the impact of government supply-side incentive policies (green subsidies) and demand-side incentive policies (public procurement) on enterprise production and sales decisions for both traditional green products and green-label products. By constructing game-theoretical models, we match these two types of incentive policies with the two categories of green products, resulting in four analytical scenarios. Our findings reveal that under public procurement policies, enterprises producing green-label products achieve greater profitability; however, these policies are less effective at enhancing social welfare compared to green subsidies. In contrast, manufacturers of traditional green products tend to prefer green subsidies, which also deliver greater social welfare benefits to the government. To further advance social welfare outcomes, governments should improve the visibility and marketing of green-label products when granting certifications. Through a comparative analysis of models and consideration of the distinct characteristics of the two product types, this study offers valuable insights for industry practitioners and policymakers engaged in green manufacturing.

Keywords: Green manufacturing; Green label; Public procurement; Green subsidy; Game theory (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:106:y:2025:i:c:s1057521925006349

DOI: 10.1016/j.irfa.2025.104547

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