Effect of government subsidies on supply chain decision-making and coordination in the context of COVID-19

School of Business, Jiangnan University, 214122 Wuxi, P.R. China.

^* Corresponding author: wuyongqian@jiangnan.edu.cn, qianyijiaemail@163.com

Received: 21 October 2020
Accepted: 1 June 2021

Abstract

Considering the two-stage supply chain composed of a leading retailer and a manufacturer under the background of covid-19 epidemic, the retailer determines the anti-epidemic effort level and bears the corresponding costs, and the manufacturer determines the cost sharing rate under the coordination strategy. This paper analyzes the pricing decision, anti-epidemic effort level and cost sharing rate of supply chain under different government subsidy measures and coordination strategies. From the perspective of Stackelberg game, we find that under the background of epidemic situation, government subsidies can improve the level of social welfare; the improvement of marginal income of anti-epidemic efforts is conducive to obtain a higher level of anti-epidemic efforts and social welfare; Within the reasonable marginal revenue range of anti-epidemic efforts, the coordination strategy can improve the retailers’ anti-epidemic efforts and social welfare level, and the government can obtain the maximum anti-epidemic efforts and social welfare level by subsidizing manufacturers with cost sharing.