A Game-Theoretic Approach to Government Customs Tariff Policy in the Import Supply Chain of Green and Conventional Vehicles

Introduction and Objectives: This article delves into the strategic interplay between key actors within this supply chain, namely the governments setting trade policy, the manufacturers producing both green and non-green vehicles, and the dealers responsible for distributing these vehicles to consumers. The central aim of the analysis is to precisely determine how the imposition of customs tariffs affects critical market variables such as the ultimate price of vehicles paid by consumers, the level of service provided throughout the distribution network, and, crucially, the overall "greenness" or environmental impact of the vehicles sold. The core of the investigation specifically explores the effects of the relative tariff rates applied to green vehicles compared to those applied to non-green vehicles. The article examines how these green-to-non-green vehicle tariff ratios influence the equilibrium prices observed in the market for both types of vehicles. Furthermore, it analyzes the behavioral responses of green vehicle manufacturers to various tariff adjustments, paying close attention to how they might alter their production strategies, pricing decisions, or investment in green technologies in response to changes in the tariff landscape.

Methods: This research utilizes a three-level Stackelberg game framework to analyze the complex interactions between various key players in the automotive industry, specifically concerning green and non-green vehicles. At the first level, the government, acting as the policymaker, sets the regulatory landscape. Below the government are the foreign car manufacturers, differentiated into those producing green vehicles and those producing non-green vehicles. These manufacturers strategically respond to the government's policies. At the lowest level are the domestic dealerships, who interact directly with consumers. The Stackelberg game allows us to explicitly model the sequential decision-making process, where each level anticipates and reacts to the actions of the levels above and below them. To demonstrate the applicability and validity of the proposed model, a real-world case study is conducted. This case study provides empirical support for the model's predictions and assumptions. Furthermore, comprehensive sensitivity analyses are performed to investigate the influence of key parameters on the equilibrium outcomes. This analysis seeks to identify potential conflicts or synergies between the government, foreign manufacturers, and domestic dealerships, providing insights into how policies can be designed to achieve a more equitable and sustainable outcome for all stakeholders.

Findings: The findings from the data analysis show that applying different tariff policies on green and non-green vehicles has significant effects on supply chain performance. When the tariff on non-green vehicles is higher than that on green vehicles, the final price of these vehicles is higher, even if their base price is lower. It was also found that the way in which income is divided between the manufacturer and the dealership has a direct impact on their profitability; so that as the manufacturer's share of the dealership's income increases, the manufacturer's profit increases, while the dealership's profit initially increases and then decreases after reaching the optimum point. The analyses showed that increasing the ratio of green to non-green vehicle tariffs has a negative impact on the government's environmental benefits. However, this change has a nonlinear effect on the government's overall profit, first increasing and then decreasing it. The findings suggest that tariff policies can serve as an effective tool to steer the market towards greener products, but they must be designed carefully and with all aspects in mind.

Conclusion: The results show that game theory-based tariff policymaking can simultaneously achieve economic and environmental goals. The findings indicate that setting the optimal ratio of green to non-green vehicle tariffs not only creates a proper balance between the interests of the government, manufacturers, and dealers, but also can act as an effective tool to guide the market towards more sustainable products. For the development of future research, it is suggested that studies be conducted on the generalization of the supply chain structure with the presence of green vehicle dealers, examining the impact of domestic manufacturers on market competition, evaluating types of cooperation agreements between manufacturers and dealers, analyzing factors affecting consumer demand, and comparing tariff policy with other support tools. Such research can lead to a deeper understanding of the dynamics of this market and to designing more effective policies.