Government financial intervention in green and regular supply chains: Multi-level game theory approach

Abstract

In this paper, we consider the effect of a government's environmental protection policies on green and regular supply chains. The proposed model is founded upon a three-level distributed programming problem where the government as a Stackelberg leader determines subsidy and tax strategies for green and regular supply chains, respectively. By choosing the appropriate subsidy and tax, the government aims to decrease the negative effects of a regular supply chain on the environment and to encourage green production. Each supply chain as a Stackelberg follower consists of one seller and one buyer. The nonlinear bi-level programming problem is first transformed into a single-level programming one by Karush-Kuhn-Tucker conditions, then it is solved by a branch-and-bound method. At the end, we present a numerical example to investigate how the budgetary constraints of the government affect the efficiency of its decisions to reduce the pollution of the products.