Appliances To The Countryside Way Of State Subsidies And Subsidies Object

In December 2007, while China's foreign trade was in hot water and domestic demands were low, the Ministry of Finance and the Ministry of Commerce together initiated trial run of "home appliances going to the countryside" policy in provinces of Shan Dong, Si Chuan and He Nan. Year 2008's sub-prime debt crisis further affected the exporting business, so our government expanded the policy's coverage into 36 provinces, autonomous regions and municipalities all over China, as well as the number of types of appliances that are subjected in the policy. As the policy gains momentum, and affects more and more people, it is also gathering publicity in the academia. People have found many problems regarding the policy, mainly revolving around subsidy target and the modes of delivery.This thesis assumes a two-echelon supply chain consisting one manufacture and one retailer. The game theory of the system follows Stackelberg's game theory, in which the manufacturer has the dominant position. The manufacturer and the retailer are both independent decision-makers. The manufacturer produces one product, which is sold to the consumer through the retailer at a certain price. The demand the retailer faces is linear. We also assume that the product's life duration is relatively short (e.g. consumer electronics), hence we only consider a single production run and its delivery. This thesis investigated two delivery modes for the subsidy, limited-consumer-price and limited-rebate, from the perspective of increasing domestic demand and supply chain profit, it also discusses the subjects of the subsidy, which are consumers, retailer and manufacturer in this paper.We conclude that, limited-consumer-price delivery mode is more advantageous than limited-rebate mode in turns of increasing domestic demands; and vice-versa for supply chain profit, where limited-rebate is more effective. Limited-consumer-price has no effect on supply chain profit increase, whereas limited-rebate increases supply chain profit while increasing domestic demand; nonetheless, the increase is smaller compare to limited-consumer-price's increase on supply chain profit.We also conclude that the choice of subsidy subject depends primarily on price sensitivity coefficient of the subsidized product. For more price sensitive products, it is better to subsidize the retailer or the manufacturer. The increase in domestic demand and supply chain profit are the same in both cases. For products that are less price sensitive, it is better to subsidize the consumers.After studying the model thoroughly, we also find that if the subsidy is large enough, the domestic demand increased by limited-rebate subsidy will surpass the demand increase brought by limited-consumer-price subsidy. Nevertheless, such large subsidy is difficult to achieve in China.