Competition of domestic manufacturer and foreign supplier under sustainable development objectives of government

•Competitive and monopolized markets for domestic and foreign products are modeled.•Government intervention is incorporated in the model as a leading player's strategy.•Sustainable development objectives for government intervention are proposed.•Specific limits on government's tariffs ensure competitive or monopolized markets.•Comparison between manufacturers’ responses in both markets is thoroughly analyzed.

Currently, governments that maintain sustainable objectives often adopt financial incentives and deterrents to orchestrate the outsourcing decisions of manufacturers. This work investigates the effect of government financial intervention on the competition and cooperation of two manufacturers. One manufacturer pursues an in-house production strategy, and the other outsources production to a foreign supplier. Regarding the financial, environmental and social objectives of the government and the leadership role of the government in the market, this problem is formulated as a multi-level, multi-objective decision making model. We found that specific boundaries for tariffs set by the government lead to a stable competitive or monopolistic market. A comprehensive analysis of the government policies reveals the possible outcomes of the policies regarding the sustainable objectives.