Green Supply Chain Operations Decision and Government Subsidy Strategies under R & D Failure Risk

The behavior of enterprises upgrading green technology presents a certain risk of failure. In this paper, the probability of R & D failure that is not considered in most articles is introduced into the model, and the supply chain composed of green product manufacturers and retailers is considered. The optimal operation decision of the green supply chain under the two modes of government subsidizing manufacturers' R & D costs and subsidizing green product production costs is analyzed. Under the same subsidy expenditure, this study examines which subsidy method can maximize social welfare. The results show that, when the production cost of green products developed by manufacturers is high, if the government budget is low, the production cost of green products shall be subsidized; if the government budget is high, the manufacturer's R & D cost should be judged. If the R & D cost is high, the production cost of green products should be subsidized to encourage retailers to order more green products. However, if the R & D cost is low, the R & D cost of green products should be subsidized to encourage manufacturers to invest the most in R & D. When the production cost of green products developed by manufacturers is low, the production cost of green products should be subsidized no matter the R & D cost of manufacturers. Additionally the conclusion has been verified by the actual case.

Automated summary

This paper examines the risk of failure in the behavior of enterprises upgrading green technology and the impact of government subsidies on the green supply chain. The results show that different subsidy methods can maximize social welfare under different circumstances.