Subsidy policies and supply chain management for emerging cruise industry

Abstract

To facilitate the development of the emerging cruise industry, local governments of many coastal cities in China have launched a variety of subsidy policies to support cruise companies and the companies that supply goods to cruise ships. Using a three-stage game model, this study derives a better understanding of the conditions under which it is optimal for the government to subsidize a cruise company or supplier. The results reveal that the optimality of different subsidy policies depends on a directly proportional relationship between the cruise company’s operating cost and the supplier’s cost. These results yield important implications. On the one hand, the government should be mindful of the evolution of the local cruise market and the relative emphasis between the cruise company’s profit and supplier’s profit when designing an effective subsidy policy. On the other hand, the enterprises along the cruise supply chain can use this study’s results to optimize their decision-making processes in responding to the external financial incentives.

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