Buyer selection and service pricing in an electric fleet supply chain

Abstract

Much attention has been focused on supplier selection in operations. There has been less research on the supplier selecting buyers in a two-echelon supplier-buyer chain, which we study for downstream taxicab vehicle fleets. We consider the problem of pricing infrastructure services by an electric vehicles (EVs) service provider (SP), which determines the group of taxicab companies (TCs) that will adopt EVs. We study SP’s pricing decisions in a decentralized supply chain under a general infrastructure cost function, multiple TCs, and symmetric information. We extend the modeling to the case with (i) endogenous demand and EV-taxicab end-consumer pricing and (ii) asymmetric information between SP and TC. We analyze the factors that influence SP’s profits and the set of participating TCs who adopt EVs. We find that when the fleet size of TCs increases, SP prefers to serve more low-mile TCs than the high-mile TCs and even removes some high-mile TCs in exchange for low-mile TCs, where low and high-miles correspond to average miles driven in a time period (shift). When the coefficient of variation of miles driven increases, SP prefers to serve more high-mile TCs than the low-mile TCs. In general, the set of TCs that adopt EVs cannot be simply characterized using inputs such as average miles driven by different TCs. This study provides a modeling framework and managerial implications for TC selection and pricing contracts by an EV infrastructure service provider.