Game-Theoretic Analysis of Price and Quantity Decisions for Electric Vehicle Supply Chain Under Subsidy Reduction
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To avoid the negative effects of electric vehicle (EV) subsidies, the Chinese government has launched an EV subsidy reduction policy, resulting in market uncertainty for EV supply chains. We study the optimal decisions of EV manufacturers and EV sellers by considering the subsidy reduction policy and stochastic demand of the EV market. We develop a newsvendor game model of a two-stage EV supply chain, and analyze how four factors—the degree of subsidy decline, the level of research and development (R&D), market demand, and inventory—affect the two parties’ optimal decisions under centralized and decentralized decision making. Our key results show that: (1) The EV subsidy reduction will not have a significant negative impact on the EV market; (2) The key factors for stimulating the development of the EV market are the R&D level and market demand for EVs, and EV sales are the major contributor to increased EV supply chain profits; (3) Improvement in EV market demand will increase market competition and market vitality; (4) The two decision maker-framework under centralized decision making is more advantageous to the popularization and development of EVs. When centralized decision making is difficult, a coordinated strategy under decentralized decision making can yield the same results as centralized decision making.
KeywordsSupply chain management Electric vehicle Newsvendor game model Subsidy reduction
JEL ClassificationD41 D58 E61
The authors are grateful for the generous comments and guidance provided by many experts. This research is supported by the Natural Sciences Foundation (NSF) of China (Grant Nos. 71671001, 71771002) and Natural Science Foundation of Anhui Province of China (Grant No. 1808085MG214).
- Han, H., Ou, X., Du, J., Wang, H., & Ouyang, M. (2014). China’s electric vehicle subsidy scheme: Rationale and impacts. Energy Policy, 73(C), 722–732.Google Scholar