We investigate a symmetric duopoly setting in which two manufacturers produce the traditional and public interest (PI) products under a government’s subsidy scheme. A higher subsidy can increase the sale of the PI product but reduce the sale of the traditional product. Then, we study an asymmetric setting in which a manufacturer produces one of the two products and the other manufacturer produces both products. The government’s optimal subsidy is increasing in the marginal externality of the PI product.
Bibliographical noteThe first author (Chunlin Luo) was supported by the National Natural Science Foundation of China (Grant Nos. 71461009, 71261006), and Science and technology project of Jiangxi Provincial Education Department (No. GJJ160436). The second author (Mingming Leng) was supported by the General Research Fund (GRF) of the Hong Kong Research Grants Council under Research Project No. LU13500015. The third and fourth authors (Xin Tian and Shouyang Wang) were partially supported by the National Natural Science Foundation of China (Nos. 71390330, 71202114).
- Public interest product
LUO, C., LENG, M., TIAN, X., & WANG, S. (2017). Subsidizing purchases of public interest products : a duopoly analysis under a subsidy scheme. Operations Research Letters, 45(6), 543-548. https://doi.org/10.1016/j.orl.2017.08.003