Government subsidies in manufacturing and remanufacturing with consumer segment and heterogeneous demand

Abstract

Waste products have dual properties; environmental hazards and resource recovery, while recycling behavior has a greater positive external economic effect, which often results in less enthusiasm for enterprises to engage in remanufactured activity. For price decisions on whether a government should subsidize a closed-loop supply chain or not, a Stackelberg game model was constructed under three scenarios: 1) none are subsidized (Model N), 2) subsidize the manufacturer (Model M), and 3) subsidize the recycler (Model R). This is in order to obtain the optimal government subsidy and decisions regarding costs, as well as to analyze the difference between the equilibrium of the three scenarios. It has been concluded that a government subsidy improves social welfare, as well as a government implementation of different subsidy policies based on the need for economic and social progress.