Analysis of Environmental Policy’s Impact on Remanufacturing Decision Under the Effect of Green Network Using Differential Game Model

Consumers' environmental protection awareness promotes the quality of green products produced by remanufacturers, which requires higher input cost and more efforts but wins environmental reputation in return. In order to encourage remanufacturers to produce products with less pollution, government enacts environmental policy to subsidy the production of remanufacturing. This paper aims to analyze the impact of subsidy on remanufacturing decision and identify the optimal decisions under the effect of green network using a differential game model. First, both government and remanufacturer's cost functions are established with their own environmental effort, respectively. Then, their benefit functions are built to represent their own reward, in which multiple factors are taken into account including but not limited to the environmental reputation of remanufacturer and consumers' demand for remanufactured products. Using the models of Nash-non cooperative game, Stackelberg master-slave game and cooperative game, their benefits are calculated and compared. The equilibrium results show that the improvement level of products' environmental quality is equal to the level of subsidies, and subsidies will increase with the improvement of products' environmental quality. In addition, with the support of the government, remanufactures are able to produce the most environmentally friendly products with the most benefit. Finally, a case study is given to prove the theorems obtained in this paper.