New product design strategies with subsidy policies

Abstract

Industrial development can enrich people’s lives, but it also causes environmental pollution, which is an area of significant concern among governments, consumers, and companies. Governments formulate some environmental policies, which motivate industry by providing greater incentives for green product development. Consumers are classified into two groups — ordinary and green market segments — according to their environmental awareness and attitudes. In this regard, companies need to reconsider their primary product design strategies. By investigating the interactions among customers’ preferences, firms’ product strategies, and government subsidy policies, this paper presents a theoretical model for new product design strategies. After detailed theoretical analysis of such strategies, we found that to motivate firms to choose environmentally friendly product design strategies, governments should inaugurate effective subsidy policies. After simultaneously considering environmental issues and firms’ benefits, we designed a subsidy policy. With such a policy, firms can change their primary product design strategies and develop both green and ordinary products, thereby increasing the firms’ profits and improving the total environmental quality.