Socially responsible donation decision analysis in a supply chain under government subsidy

Abstract

As an important form for firms to demonstrate social responsibility, socially responsible donation (SRD) is be-coming increasingly widespread and attracting more attention. It is important to encourage firms to effectively undertake social responsibilities and improve social welfare. Recently, it has become very popular for firms to demonstrate their social responsibility through SRD campaigns. With the aim of solving the decision-making problem of a retailer-led socially responsible supply chain considering government subsidy, this study established a three-stage Stackelberg game model. By analyzing the impact of pricing and donation decisions on operations and management, either with or without government subsidy, we found that to achieve better performance, retail firms will choose to implement donation activities. However, it is not the case that the higher the donation, the better the performance. In addition, there is a gap: without government sub-sidy, social welfare is not optimal when members’ performance in the supply chain is maximized, and more donations are needed to maximize social welfare. This study proves that government subsidy can encourage supply chain members to generate more donations, while improving the performance of the supply chain and social welfare. We propose an optimal subsidy rate to eliminate the gap and maximize social welfare. We also analyze the impact of external parameters, includ-ing the cost parameter and consumer preference level, on the equilibrium results. Finally, we extend this research to provide management insights for businesses under uncertain market sizes and centralized decision-making scenarios.