Optimal order quantities, buyback prices, and government subsidies for cars in a sharing economy environment

Abstract

To reduce carbon emissions from urban transportation and increase the popularity of electric vehicles (EVs), many governments have provided purchase subsidies to incentivize customers to buy EVs. As the popularity of EVs increases, some governments have begun to provide battery recycling subsidies to car manufacturers. However, in a sharing economy environment, the mechanism under which the purchase subsidy and the battery recycling subsidy promote the popularity of EVs and the maturity of the EV sharing market is unclear. In this study, two commonly applied governmental subsidy policies are introduced: one considers only purchase subsidy (P-policy), and the other considers both purchase subsidy and recycling subsidy (P&R-policy). Under each policy, a stylized Stackelberg game model is constructed considering the forward and reverse supply chains in the car-sharing market. The objective of this study is to obtain the car-sharing platform’s optimal ordering quantities of EVs and fueled vehicles (FVs), the car manufacturer’s optimal buyback prices of used EVs and FVs, and the government’s optimal subsidies under the P-policy and P&R-policy. Through model-solving and analyses, it is found that both policies could increase the popularity of EVs in the car-sharing market, and the P&R-policy has a higher promotion effect on EVs than the P-policy. As for policy implementation, this study suggests that with the popularity of EVs, the subsidies under each policy should be decreased. Particularly, the declining rate of the purchase subsidy for high-performance EVs should be lower than that for low-performance EVs. The recycling subsidy for low-performance EVs should be reduced the most.