Improving interaction mechanism of carbon reduction technology innovation between supply chain enterprises and government by means of differential game

For encouraging the manufacturer and supplier to innovate in carbon reduction technology, the government tends to set a number of mandatory standards and some punitive measures in practice. However, research on the regulatory ability of the government and the relationship between governmental regulation and enterprises’ carbon reduction technology innovation is often neglected. Thus, the bilateral interaction mechanism between the government and enterprises should be established in which enterprises and governments constantly adjust individual decisions to response to the other, so as to improve the carbon emission reduction of enterprises and the level of government regulation. We use differential game methods to study the interaction between carbon reduction technology innovation and government intervention under decentralized decision without cost sharing, decentralized decision with cost sharing and centralized decision respectively. We find that the optimal level of carbon reduction technology innovation under decentralized decision is the same as centralized situation when there is no cost sharing. Furthermore, the optimal levels of government intervention are also the same in both cases. However, the optimal level of carbon reduction technology innovation and government intervention will be improved only in the case that cost-sharing proportion reaches a certain range. Therefore, a positive interaction mechanism between carbon reduction technology innovation of enterprise and intervention of government can be established. Theoretically, our paper reveals a new perspective in the research of the relationship between government and enterprises in the process of carbon reduction technology innovation and use differential game methods to study the interaction between carbon reduction technology innovation and government intervention. In practice, this paper can help government and enterprises to form a closer cooperative relationship in reducing carbon emissions. The government should give full consideration for enterprises’ actual production capacity when taking intervention measures. Meanwhile, enterprises should refer to the intervention indicators of the government when conducting carbon reduction technology innovations.