A coordination mechanism through cost sharing of corporate social responsibility and government subsidy in a two-echelon supply chain

This paper aims to deal with the coordination problem of the supply chain through cost sharing of corporate social responsibility (CSR) and government subsidy.

With respect to the coordination problem of the supply chain with CSR, this paper constructs a three-stage game model consisting of a dominant retailer, n suppliers and government. From the perspective of cost sharing and government subsidies, this paper discussed the decentralized and centralized decision-making, respectively. On this basis, this paper designed a coordination mechanism considering both cost sharing and government subsidies and explore the impact of cost sharing rate and government subsidy rate on CSR efforts, members’ profits and social welfare.

CSR can improve the profits of supply chain members and the overall performance of the supply chain. Then the profits of supply chain nodal enterprises will be affected by the fulfillment level of CSR of their partners. Furthermore, excessive CSR will erode the supply chain profits and cause resource waste. High CSR costs often make retailers low CSR effort level, while a high CSR cost sharing rate can reduce the profits of suppliers and the supply chain. In addition, excessive government subsidies will lead to the decline of social welfare. Excessive government subsidies will cause the dependence of enterprises and affect their operating efficiency.

The proposed coordination mechanism can effectively do with the coordination problem of the supply chain.

The proposed coordination mechanism considering cost sharing and government subsidies simultaneously can effectively deal with conflict problems and guarantee the supply chain members and the supply chain to maximize their profits and social welfare.