Government subsidies and online branding for agricultural products

Online branding plays an increasingly vital role for agricultural products in agriculture and e-commerce industries alike. To improve the cooperation between farmers and e-retailers, and to increase awareness of agricultural products through online branding, many governments implement series of subsidy policies. We investigate the impact of government subsidies by proposing a three-player game model (consisting of a government, a farmer, and an e-retailer) in supply chains. More specifically, we develop four Stackelberg game scenarios, including a benchmark scenario in which government provides no subsidies, two scenarios in which government subsidizes either farmer or e-retailer without subsidizing the other, and one in which both are subsidized. We find awareness of online branding for agricultural products is positively related to farmers? market sensitivity while e-retailers? cost factor shows a negative relation; optimal awareness emerges when both farmers and retailers are subsidized. In turn, farmers and retailers achieve their best profits when both are subsidized. Furthermore, farmers? profits are higher than e-retailers? in every subsidy scenario. We obtain the most effective parameters for government subsidies using ex ante and ex post strategies, extending our model by incorporating spillover effects. Most of our conclusions are consistent with intuition and propositions we began with, but it is interesting to note that farmers? best profits appear when farmers receive subsidies and e-retailers do not.