Abstract
Motivated by the increasing environmental concerns about the used electric vehicle batteries in China, an electric vehicle manufacturer’s battery recycling strategy under government subsidy was studied. A consumer utility function was used to capture consumer environmental awareness associated with battery recycling and the game-theoretical approach was applied to analyze the interaction between the government and the manufacturer. It was found that, with an exogenous government subsidy, the manufacturer either recycles all the batteries, or it does not recycle any batteries if the impact of the recycling scale on costs is unremarkable; otherwise, the manufacturer recycles some used batteries when the benefit from recycling is moderate. Interestingly, an increased subsidy causes the manufacturer’s battery recycling rate to decrease if the subsidy is sufficiently large. When the government subsidy is endogenously, either full recycling, no recycling, or partial recycling can still arise. The optimal battery recycling rate and social welfare are lower in a non-cooperative game than in a cooperative game if the benefit from recycling is relatively low. The main findings were numerically justified with realistic subsidy data in China. The numerical results indicate: (1) the optimal battery recycling rate locates in a closed interval from 0 to 1 given an exogenous or an endogenous government subsidy, and it decreases with the subsidy when the subsidy is not less than 50% of the production cost of electric vehicle; (2) the social welfare first increases to a maximum value and then decreases as the subsidy increases; and (3) the optimal battery recycling rate increases significantly and the social welfare is improved when there is cooperation between the government and the manufacturer.
Highlights
With the growing environmental concerns in modern society, electric vehicles (EVs) have become an increasingly popular transportation option worldwide [1]
This study focused on the interaction between the government subsidy and an EV manufacturer’s battery recycling strategy
Two cases were analyzed in this study: first, the one in which the government is non-strategic and the subsidy is exogenously given; and, second, the one in which the government is strategic and interacts with the manufacturer in a non-cooperative or a cooperative game
Summary
With the growing environmental concerns in modern society, electric vehicles (EVs) (mainly battery EVs and plug-in hybrid EVs) have become an increasingly popular transportation option worldwide [1]. It was assumed that the consumers are environmentally aware and obtain extra utility from an increased battery recycling rate τ This assumption captures the growing environmental concerns about the used batteries with the explosive development of the EV market in recent years. The manufacturer is the sole decision-maker that makes the optimal decisions regarding the battery recycling rate τ and the market price and demand, p and q, when the government subsidy s is exogenously given. This indicates that the government may be non-strategic and does not interact with the manufacturer in practice. There is a centralized decision-maker, instead of the government and the manufacturer, who makes all the decisions regarding subsidy, battery recycling rate and market to maximize the social welfare
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