Green subsidy strategies in capital-constrained supply chains with manufacturer fairness concerns

Fei Pan; Ming Liu; Yanqiu Zhu; Fei Pan; Ming Liu; Yanqiu Zhu

doi:10.3934/jimo.2026155

Journal of Industrial and Management Optimization

2026, Volume 22, Issue 9: 4449-4480. doi: 10.3934/jimo.2026155

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Green subsidy strategies in capital-constrained supply chains with manufacturer fairness concerns

1.
Business School, University of Shanghai for Science and Technology, Shanghai 200093, China
2.
School of Intelligent Emergency Management, University of Shanghai for Science and Technology, Shanghai 200093, China
3.
Business School, Suzhou University, Suzhou 234000, China

Received: 03 April 2026 Revised: 30 July 2026 Accepted: 10 August 2026 Published: 21 August 2026
91A35, 91A80

Capital constraints remain a major barrier to green transformation in supply chains, particularly for upstream manufacturers that must finance costly green investment. Yet little is known about how a manufacturer's fairness concern interacts with capital constraints to shape the effectiveness of retailer-led green subsidy strategies. To address this gap, we developd a Stackelberg game between a capital-constrained manufacturer and a financially strong retailer, and compared three retailer-led financing strategies: the production loan (strategy PL), the green loan (strategy GL), and the cost-sharing loan (strategy CL). We derived equilibrium decisions under each strategy, identified the parameter regions in which each strategy is preferred, and further examined how fairness concern alters their comparative performance. The results showed that Strategy PL can relieve short-term liquidity pressure but cannot provide sustained incentives for green investment. Strategy GL is most effective when green investment is relatively inefficient, whereas Strategy CL becomes superior when green investment efficiency is sufficiently high and the retailer's cost participation can materially reduce the manufacturer's burden. Moreover, the manufacturer's fairness concern significantly moderates green investment incentives, profit allocation, and strategy ranking, and may even reverse the relative attractiveness of Strategy GL and Strategy CL. These findings offer new insights into the joint design of financing and coordination mechanisms for sustainable supply chains.
- green subsidy,
- capital constraints,
- retailer-led,
- cost-sharing,
- fairness concern
Citation: Fei Pan, Ming Liu, Yanqiu Zhu. Green subsidy strategies in capital-constrained supply chains with manufacturer fairness concerns[J]. Journal of Industrial and Management Optimization, 2026, 22(9): 4449-4480. doi: 10.3934/jimo.2026155

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Abstract

Capital constraints remain a major barrier to green transformation in supply chains, particularly for upstream manufacturers that must finance costly green investment. Yet little is known about how a manufacturer's fairness concern interacts with capital constraints to shape the effectiveness of retailer-led green subsidy strategies. To address this gap, we developd a Stackelberg game between a capital-constrained manufacturer and a financially strong retailer, and compared three retailer-led financing strategies: the production loan (strategy PL), the green loan (strategy GL), and the cost-sharing loan (strategy CL). We derived equilibrium decisions under each strategy, identified the parameter regions in which each strategy is preferred, and further examined how fairness concern alters their comparative performance. The results showed that Strategy PL can relieve short-term liquidity pressure but cannot provide sustained incentives for green investment. Strategy GL is most effective when green investment is relatively inefficient, whereas Strategy CL becomes superior when green investment efficiency is sufficiently high and the retailer's cost participation can materially reduce the manufacturer's burden. Moreover, the manufacturer's fairness concern significantly moderates green investment incentives, profit allocation, and strategy ranking, and may even reverse the relative attractiveness of Strategy GL and Strategy CL. These findings offer new insights into the joint design of financing and coordination mechanisms for sustainable supply chains.

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