The Impact of Demand Uncertainty on Consumer Subsidies for Green Technology Adoption

This paper studies government subsidies for green technology adoption while considering the manufacturing industry’s response. Government subsidies offered directly to consumers impact the supplier’s production and pricing decisions. Our analysis expands the current understanding of the price-setting newsvendor model, incorporating the external influence from the government, who is now an additional player in the system. We quantify how demand uncertainty impacts the various players (government, industry, and consumers) when designing policies. We further show that, for convex demand functions, an increase in demand uncertainty leads to higher production quantities and lower prices, resulting in lower profits…

• NS
  National Science Foundation

  Awards: CMMI-1162034, 1162034
• DO
  Division of Civil, Mechanical and Manufacturing Innovation