Green baton: how government interventions advance green technological innovation

How to formulate an effective intervention mechanism to stimulate green technological innovation (GTI) has become a key problem that plagues the government. Existing researches on GTI seldom consider consumer preference and market competition, and there is a lack of comparative research on GTI governance mechanisms among different governments. Therefore, considering consumer green technology preference and market competition, this paper proposes three different government intervention policies, i.e., no intervention (B), intervening firm (F) and intervening consumer (C), and develops a three-layer Stackelberg game model including the government, green and non-green firms and consumers to study the impact of three government interventions on GTI, product pricing and profits. Backward induction is used to solve optimal decisions. Then, to maximize social welfare, the optimal government intervention schemes under different conditions are discussed. Considering the impact of consumer behavior and product competition on GTI, this paper innovatively compares the optimal decision-making of manufacturers and the optimal government intervention scheme selection in different conditions from the perspective of maximizing social welfare. The results show that there is no optimal decision that is immutable. Market share of green products is positively correlated with the production cost adjustment coefficient. The intervention decision, GTI and green product pricing are negatively correlated with the green improvement coefficient and positively correlated with the environmental improvement coefficient. This research can be used to better guide the government how to design and select effective GTI incentive mechanism and guide manufacturers how to make the best response mechanism in the competitive environment.

Automated summary

This paper proposes three different government intervention policies to stimulate green technological innovation and develops a game model to study their impact. The results show that various factors influence the optimal decisions and can guide the government to design effective GTI incentive mechanisms and manufacturers to make the best response in a competitive environment.