Strategic Analysis of Tariff and Subsidy Policies in Supply Chains with 3PLs: A Bilevel Game-Theoretic Model

Ali Hussain Alzoubi and Ahmad Shafee ()
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Ali Hussain Alzoubi: Registration Department, College of Technological Studies, PAAET, Shuwaikh 70654, Kuwait
Ahmad Shafee: Laboratory Technology Department, College of Technological Studies, PAAET, Shuwaikh 70654, Kuwait

Mathematics, 2025, vol. 13, issue 16, 1-22

Abstract: This paper develops a bilevel game-theoretic model to analyze the strategic effects of tariffs and subsidies in a global supply chain involving a manufacturer and a third-party logistics (3PL) provider. The government, acting as a Stackelberg leader, sets fiscal instruments to maximize national welfare, while downstream supply chain participants respond by optimizing production, pricing, and logistics outsourcing decisions. The model is evaluated under three coordination structures—centralized, decentralized, and alliance-based—to examine how decision alignment influences policy effectiveness. Simulation results show that while tariffs negatively impact supply chain efficiency and profitability, well-designed subsidies can partially or fully offset these effects, particularly under centralized coordination. The model further reveals that policy outcomes are highly sensitive to the strategic power structure within the supply chain. This study advances the literature by integrating endogenous government behavior with logistics coordination and supply chain decision-making within a unified bilevel optimization framework. The findings offer actionable insights for both policymakers and global supply chain managers in designing robust fiscal and coordination strategies.

Keywords: bilevel game theory; supply chain coordination; tariffs and subsidies (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2025
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