Matching-game approach for green technology investment strategies in a supply chain under environmental regulations

Facing increasingly severe environmental problems, green technology (GT) innovation has become an ef-fective way to achieve the sustainable development of firms. Many manufacturers often choose and in -vest in appropriate GTs from GT-suppliers to improve the environmental impact of production. But others abandon GTs because they are too expensive to invest in. This paper thereby studies the dynamic in-vestment strategy of GT in a manufacturer-supplier supply chain and explores the optimal government subsidy incentive and its impact on investment and sustainable production decisions. Firstly, an original two-sided matching game model (including two-sided matching analysis and Nash equilibrium analysis) is presented to study the matching process between a manufacturer with a limited investment budget and a GT-supplier with GTs and to determine the optimal GT investment-production strategy. Then, a government-manufacturer Stackelberg game model integrating differential game is constructed to deter-mine the optimal government subsidy strategy and to investigate the effect of government subsidy on investment-production decisions. The results show that stable matching between the manufacturer and GT-supplier can be obtained. Numerical simulations verify the feasibility and rationality of the proposed matching game mechanism and demonstrate that GT investment profit is higher than non-investment profit, and subsidy profit is better than non-subsidy profit. The increase in the carbon price leads to an increase in the GT investment intensity. The increase in the carbon price can cause an increase in prod-uct greenness and green demand. The contributions of this paper are in providing an infrastructure for studying how managers can obtain the optimal GT investment-production strategy in the supply chain, and how the government formulates the optimal subsidy strategy to stimulate managers' GT innovation behavior. (C) 2021 Institution of Chemical Engineers. Published by Elsevier B.V. All rights reserved.