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Pricing policies for green energy-saving product adoption and government subsidy

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Abstract

Driven by the goal of “carbon neutrality” for achieving energy savings and carbon reductions, various industries are striving to continuously introduce green energy-saving products. This study contributes to providing pricing policies and product launch strategies for the green energy-saving product manufacturers, aiming at increasing their profitability when facing strategic consumers. We develop a two-period pricing model, which considers three pricing policies and three product launch strategies in the presence of green information sharing, and we then investigate the performance of two types of government subsidy programs. The basic results show that the manufacturers would share information and adopt price commitment or price matching with dual rollover launch, when both the information sharing cost and consumer strategic level are low. While sharing green information is always beneficial to manufacturers its impact on sales quantity depends on consumer strategic level and technology preference. The further finding suggests that the highest profits can be achieved by adopting both price commitment and price matching, whereas the largest sales quantity can only be obtained under dynamic pricing. To achieve the promotion goal under price commitment, we derive the optimal subsidies of the manufacturer and consumers, and the results indicate that subsidizing consumers can not only help to reach the maximum promotion but also eliminate the risk of market failure. This study is expected to provide insights of subsidy programs for policy makers to enable manufacturers to achieve the promotion goal of energy-saving product, and it also accelerates the development of sustainable supply chain management.

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Data sharing not applicable to this article as no datasets were generated or analyzed during the current study.

Notes

  1. See https://www.theverge.com/2018/3/4/17071640/geneva-motor-show-2018-vw-audi-mercedes-ev-tesla for more information.

  2. The green information refers to the energy-saving function of green products, and only after the salesmen explain and show products’ energy-saving functions, consumers will understand how to make the most of the energy-saving products. This is different from quality information, because quality information refers to consumers’ evaluation of products based on brand awareness or other consumers’ comments, while green information refers to consumers’ energy-saving experience after trying green products on site.

  3. See https://www.trustedreviews.com/news/tesla-model-x-vs-model-s-range-price-3704188 for more information.

  4. See https://www.theverge.com/2019/2/28/18245165/tesla-model-3-price-lower-cost-elon-musk-news for more information.

  5. See https://www.theverge.com/21570383/price-matching-policy-apple-google-microsoft for more information.

  6. See http://www.gov.cn/zhengce/content/2020-11/02/content_5556716.htm?trs=1 for more information.

  7. According to a study by Cui and Shin (2018), limited inventory is an important factor when selling to strategic consumers. However, green products in this study are mainly referred to large-size energy-saving electrical appliances (e.g., refrigerators, washing machines) or new electric vehicles, etc., and there will not be a large demand from consumers like daily necessities. We pay attention to the impact of pricing and product launch strategies, so in order to minimize the influence of irrelevant factors, we assume the manufacturer has ample capacity to satisfy demand for both generations of products.

  8. See http://www.gov.cn/zhengce/zhengceku/2022-01/21/content_5669785.htm for more information.

  9. See https://www.surveymonkey.com/curiosity/more-consumers-are-opening-their-wallets-for-eco-friendly-products/ for more information.

  10. Different from Yu et al. (2016), we do not consider the impact of early consumer reviews on consumers who purchase latterly. When consumers buy large-size energy-saving products, they generally experience various functions by themselves after the shop assistant depicts the products’ instructions, and all consumers’ evaluations generated from their own experience of green products.

  11. The manufacturer compensates the consumers who buy products at the earlier period due to markdowns of new products. One reason is that the model in this study is based on actual cases. As mentioned in the introduction section, after selling the old model for a period of time, Xiaopeng Automobile have launched a new model with low price and high mileage. Xiaopeng has to compensate the price difference for early buyers. The second reason is that when making purchase decisions in two periods, strategic consumers have taken into account the trend of price reduction of old products in the second period, but they do not necessarily anticipate the launch of new products with lower prices. Therefore, it seems unfair for consumers if the manufacturer launches a new product at a lower price in the later stage, which will lead to the damage of the manufacturer’s reputation.

  12. See https://www.thinkbusiness.ie/articles/driving-electric-vehicle-adoption-ireland/ for more information.

  13. See https://www.unilever.com/news/press-and-media/press-releases/2017/report-shows-a-third-of-consumers-prefer-sustainable-brands/ for more information.

  14. See https://www.surveymonkey.com/curiosity/more-consumers-are-opening-their-wallets-for-eco-friendly-products/ for more information.

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Acknowledgements

This study is supported by the National Natural Science Foundation of China (No.914 71871024), Funds for Sichuan University to Building a World-class University (Grant No.skbsh2023-68), and BIT Research and Innovation Promoting Project (No.2022YCXZ022).

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Authors and Affiliations

  1. School of Management and Economics, Beijing Institute of Technology, Beijing, 100081, China

    Danyang Xu, Jiancai Wang & Xiang Zhang

  2. Business School, Sichuan University, Chengdu, 610065, China

    Wenhui Zhao

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  1. Danyang Xu
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  2. Jiancai Wang
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Xu, D., Wang, J., Zhao, W. et al. Pricing policies for green energy-saving product adoption and government subsidy. Ann Oper Res (2023). https://doi.org/10.1007/s10479-023-05414-2

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