Government subsidy strategy based on competitive retail market during COVID-19

COVID-19 has a significant impact on consumer shopping behavior in retail markets. In this paper, we consider a competitive market consisting of brick-and-mortar retailer and online retailer, and use game theory to construct a Hotelling model in a competitive situation. Three decision models of no government subsidy, consumer subsidy, and brick-and-mortar retailer subsidy are considered to explore the effects of consumer social distance preferences and government subsidy strategies on retailer pricing and epidemic prevention service levels. The results show that subsidizing consumers will not lead to better socio-economic development, but it will definitely benefit the operation of B&M retailer. To some extent, the cost subsidy of epidemic prevention services for B&M retailer can improve the economic level of society.