Impacts of green credit policies and information asymmetry: From market perspective

Under green credit policies, green credit subsidies can be employed to provide differentiated credit services for manufacturers with varying eco-performance. Meanwhile, on the market side, due to the variety and complexity of associated technologies, it is difficult for customers to tell the green difference between competing products. Within this context, we investigate the effectiveness of governments' green credit policies under this green information asymmetry. Specifically, a two-stage duopoly game model is developed to analyze the strategic interaction among government, manufacturers, and customers. We find that when making greener products incurs insignificant additional costs, green interest subsidies are not necessary for greener manufacturers to gain a competitive edge because of the market preference for greener products. In addition, we find that customers' behavior impacts the effectiveness of market-oriented green credit policies. In particular, when customers are inclined to believe a high green difference exists, the greener manufacturer will be more likely to benefit from green interest subsidies. Based on the analysis results, the following policy recommendations are developed. When determining the level of green interest subsidies for competing products with varying greenness, the government should consider their cost differences. Moreover, to enhance the effectiveness of market-based green credit policies, a customer-oriented standard rating system can be established to facilitate ordinary customers in comparing competing green products.