Government subsidies-based profits distribution pattern analysis in closed-loop supply chain using game theory

In closed-loop supply chain, the profits distribution pattern tends towards a comparatively stable status due to complete market competition. However, after introducing government subsidies, the former profits distribution pattern will be destroyed and tend towards a new one. This paper studies differences between the two statuses in the background of new replacement policy of household appliances in China using game theory. We develop two profits distribution models under no government subsidies and under government subsidies in closed-loop supply chain. By comparing the members’ profits distribution in the two models, we find that government could control the profits distribution pattern by adjusting government subsidy rate. In addition, we show that average of subsidies, subsidy rate and subsidy limit influence the effects of government subsidies policy significantly.