Investment in fuel‐consumption reduction technologies in a vehicle supply chain under different subsidy policies: A dynamic framework

Abstract It develops a differential game model of a fuel car supply chain in which consumers' low fuel consumption, green preferences, and government subsidies promote manufacturers' investment in fuel‐consumption reduction technologies (FCRT); the price, the fuel consumption per mile, and the retailer's marketing efforts jointly determine the demand for the product. There are four game scenarios constituted by ex ante or ex post government that subsidizes and shares or does not share marketing costs. The results show that ex ante and ex post subsidies can incentivize investment in FCRT. However, the preferable subsidy model depends on the parameter values; the manufacturer‐led marketing cost‐sharing contract results in supply chain coordination.