Decision-making model of elderly service companies under government subsidies

Abstract

This study considers two government subsidy policies, namely, supply-side (subsidising elderly service companies) and demand-side (subsidising elderly customers) subsidies. A Nash game model consisting of elderly customers and two elderly service providers with different levels of infrastructure is developed to present the effects of government subsidies on the price, quality and quantity of demand for elderly services under different subsidy policies. The results show that the economic situation of the region and the strategic objectives of the local government are important factors influencing the effectiveness of the government’s subsidy strategy. For areas with good regional economic conditions, subsidies should be biased in favour of elderly care institutions with poorer infrastructure; for areas with poorer economic conditions, subsidies should be biased in favour of institutions with better infrastructure. Moreover, if the government plans to reduce prices more effectively, then it should adopt a demand-side subsidy policy for areas with a small or large elderly population and a supply-side subsidy policy for areas with a medium elderly population.