Green subsidy modes and pricing strategy in a capital-constrained supply chain

Abstract

This paper investigates green credit (GC), manufacture subsidy (MS), and sales subsidy (SS) modes in a supply chain with a capital-constrained green manufacturer and attempts to find the win-win subsidy mode. We show that when the bank loan is infinite and the total subsidies of different modes are equal, GC can bring the highest returns with respect to green degree, market demand, social welfare, and environmental benefit. However, under the finite loan scenario, GC is the optimal choice for the government only when the credit line of the manufacturer is relatively high; otherwise, MS is the optimal subsidy mode.