Pricing and production R&D decisions in power battery closed-loop supply chain considering government subsidy

Abstract

With the continuous promotion of electric vehicle applications, the recycling of power battery is urgent. Some batteries, although not suitable for continued use in electric vehicles, can be recycled for echelon utilization or remanufacturing. Thus, this study considers an electric vehicle power battery closed-loop supply chain consisting of a manufacturer and a retailer. We develop three strategies: no production research and development effort strategy, production research and development effort strategy, and government subsidy for production research and development strategy. Optimal pricing and production research and development effort decisions are derived based on Stackelberg game. Results indicate that production research and development positively impact the recycling of waste electric vehicle power batteries, with government subsidy further amplifying this effect by offering higher buyback and recycling prices. Government subsidy encourages manufacturer to increase production research and development effort and lowers the market pricing of electric vehicle power batteries, making these batteries more accessible to consumers. A sizable consumer base can offset the increased costs of production research and development, enabling manufacturer and retailer to achieve greater profitability. Both manufacturer and retailer can benefit from production research and development and government subsidy, ultimately enhancing the profitability of the entire closed-loop supply chain.