Optimal subsidy strategies in a smart supply chain driven by dual innovation

Abstract

Due to the deep integration of modern information technology, supply chain management has moved into a new stage of a smart supply chain. Considering the dual smart innovation of the manufacturer's production and retailer’s service, the manufacturer-led Stackelberg game model is constructed in the smart supply chain. Under the single and coordinated government subsidy strategies, the optimal decisions of the smart supply chain are researched, and the impacts of manufacturers' risk aversion on the government subsidy strategies and supply chain decisions are analysed. In addition, the efficiencies of different government subsidy strategies are compared and analysed by numerical simulation. Finally, the results show that: (i) The moderate risk aversion by the manufacturer can improve social welfare and help provide consumers with more affordable products. (ii) The government expenditure and product prices are highest under the coordinated subsidy strategy. (iii) Subsidising manufacturers is more beneficial than subsidising retailers among the two single government subsidy strategies. (iv) In general, the coordinated government subsidy strategy is more effective than the single subsidy strategy for the innovative development of a smart supply chain. In conclusion, the research provides a significant practical reference for jointly building the smart supply chain.