Research on Game of Manufacturer and Retailer Under Government’s Subsidy

Abstract

Considering demand influenced by government’s subsidy, retail price, random factor, objective functions of maximizing expected profit are suggested to supplier and retailer, equilibrium solutions of supplier’s wholesale price, retailer’s retail price and order quantity are available based on Stackelberg game model, following conclusions are drawn by theoretical and numerical analysis, wholesale price, retail price, average demand, order quantity, profit increase with government’s subsidy; consumer’s expense price decreases with government’s subsidy. which means subsidy can boost demand, increase enterprise’s profit, reduce consumer’s cost, therefore, subsidy policy is favorable to government, enterprises and consumer.
Key words: Government’s subsidy; Manufacturer; Retailer; Stackelberg game