Government subsidy strategy selection in competing supply chains under green manufacturers' risk aversion

Junhua Liu, Youxian Zhang, Xiaofang Chen, Fu Wang and Jian Hou

Modern Supply Chain Research and Applications, 2026, vol. 8, issue 3, 362-383

Abstract: PurposeThis paper investigates how the government selects demand-side promotional subsidy strategies in a market where a green supply chain competes with a conventional supply chain and the green manufacturer is risk-averse. It focuses on analyzing the government's choice among no-subsidy, price-subsidy and the green-subsidy policies under different expenditure-benefit objectives.Design/methodology/approachThis study develops a game-theoretic model of competing supply chains, in which inter-chain competition is modeled as Cournot competition and intra-chain interaction as a manufacturer-led Stackelberg game. The green manufacturer's risk-averse behavior is characterized using a mean-variance model. A comparative policy analysis is conducted under equal-expenditure conditions and is further extended to a policy space with unequal expenditures.FindingsUnder equal subsidy expenditure, the green-subsidy policy yields the highest environmental benefit, whereas the no-subsidy policy performs best in terms of economic benefit. When the government's comprehensive benefit is considered, the green-subsidy policy should be preferred at low subsidy levels. In contrast, the no-subsidy policy becomes more desirable at moderate or high subsidy levels. Under unequal subsidy expenditure, the optimal policy choice depends on the government's expenditure-benefit objectives and is determined by a policy space partitioned by iso-expenditure curves and iso-benefit curves.Originality/valueThis study integrates competition between a green supply chain and a conventional supply chain, the green manufacturer's risk-averse behavior and the selection of demand-side promotional subsidy strategies into a single theoretical framework. By distinguishing between equal and unequal subsidy expenditures, this study derives the policy selection rules under different objectives and provides a clear basis for designing government subsidy schemes under fiscal constraints and market uncertainty.

Keywords: Competing supply chains; Green manufacturers; Risk aversion; Green promotional subsidy strategy (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:eme:mscrap:mscra-04-2026-0040

DOI: 10.1108/MSCRA-04-2026-0040

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