Competition and cooperation between green and non-green supply chains under Government’s subsidy and carbon tax to consumers

Abstract

Consumers don’t always opt for green products. The government thus needs to provide a subsidy for consumers purchasing green products and impose a carbon tax penalty on those purchasing non-green products so as to foster the growth of green supply chains (GSCs). However, discussions regarding the effects of such interventions must take into account the competitive and cooperation mode between green and non-green supply chains (NGSC). This paper aids in identifying which mode is more conducive to the government’s intervention playing a positive role. It proposes a novel model focusing on two independent competitive supply chains: a GSC and a NGSC. In practice, the standard of green products is often determined by government and industry competition, rather than decisions made by green manufacturers themselves. Therefore, this paper regards it as an exogenous variable and considers how consumers’ acceptance for green products influences on consumers’ own utility, market demand, and supply chain members’ profits in different competition and cooperation modes. Results show that higher green costs will drive up the wholesale and retail prices of both green and non-green products. Subsidy and carbon tax will increase the wholesale and retail prices of green products, while reducing those of non-green products. The improvement of green standards will inevitably lead to an increase in the wholesale and retail prices of green products, but its impact on the pricing of non-green products depends on the quantitative relationship between the cost of unit greenness and the intensity of subsidies. The impact of the industrial standard for non-green products depends on the intensity comparison between subsidies and carbon taxes. The more consumers can accept green products, the more the wholesale and retail prices of green and non-green products have to be adjusted downward. When consumer acceptance exceeds a certain threshold, the profit of the green manufacturer can surpass that of the non-green manufacturer, and then subsidies can be appropriately reduced. Both retailer cooperation and manufacturer cooperation can make the total profit of the entire supply chain competition system greater than that of the completely independent competition state, but when both supply chains enter the manufacturer-retailer cooperation mode, the total profit is not as good as that of the completely independent state, which means that centralized decision-making in the supply chain is not always superior to decentralized decision-making.