Policy of Government Subsidy for Supply Chain with Poverty Alleviation

Abstract

Government subsidy is a common practice in poverty alleviation. We used game theory and the mathematical model of operations management to investigate the efficiency of subsidy with different poverty scales when the firm owns the decision power of the wholesale price. Comparative analysis of the equilibrium solutions demonstrated the following results: Exclusive subsidy has a significant effect on the payoff of the poor farmer, but the dilemma is that the increase in the payoff of the poor farmer is against the payoff decrease of the regular farmer. Sharing subsidy has a counterbalancing effect on the payoff of the poor and regular farmers. Co-subsidy is the best for consumer surplus and social welfare, but it has little effect on improving the poor farmer’s payoff. Generally, when the poor farmers are in the majority, sharing subsidies or co-subsidy is more reasonable than exclusive subsidy. When the poor farmers are in the minority, exclusive or sharing subsidies will be more economical for the government than co-subsidy. Our research helps the government recognize that spending more money may achieve a poor result in poverty alleviation and help the firm realize that it is better to give more subsidies to the poor farmer than to itself. The highlights of the paper are as follows. Firstly, our work provides a new perspective in supply chain operations management with poverty alleviation by considering the participation of the poor and regular farmers together; secondly, the poverty scale is introduced into the mathematical model; thirdly, we pay attention to the impact of government subsidy to enterprise on the payoff of the poor farmer.