Optimal Subsidy Strategy to Motivate Suppliers' R&D Effort

A supply chain model composed of two competitive suppliers,a monopolist buyer and consumers is set up,in which the buyer procures from suppliers by tendering mechanism,suppliers' RD can cut down their production cost.Supplier's RD effort and social welfare are respectively investigated in lump-sum subsidy to supplier,unit subsidy to supplier and unit subsidy to consumers.Research shows that lump-sum subsidy to supplier can't motivate suppliers' RD effort and improve social welfare at all.Unit subsidy to supplier and unit subsidy to consumers have the same effect on suppliers' RD effort and social welfare.There exists an optimal RD subsidy to maximum social welfare.