A decision-making model for echelon utilization of retired batteries in competitive duopoly: the role of government subsidy

Abstract

As the wave of retirements in the new energy vehicle sector approaches, China’s emphasis on echelon utilization has grown to optimize battery reuse and recycling. However, the burgeoning industry will inevitably face the challenges of competition, influencing stakeholders across the supply chain. In this study, we employ game theoretic models to investigate the interplay between competitive dynamics and government subsidy policies within this industry. Through the development of a competitive duopoly echelon utilization supply chain model, our analysis offers valuable insights and recommendations for the advancement of the industry. We find that increases in echelon utilization costs prompt adjustments in retail prices by echelon utilization enterprises, third-party recyclers, and new energy vehicle manufacturers. As competition intensifies, overall supply chain profitability diminishes, resulting in a lose-lose situation, favoring only third-party recyclers, who raise wholesale prices as new energy vehicle manufacturers reduce transfer payments. Conversely, government subsidies stimulate higher total demand, benefiting subsidized echelon utilization enterprises, which enhance consumer and social value. Non-subsidized enterprises are compelled to raise retail prices. Given the positive impact of subsidies, governments should prioritize support for enterprises demonstrating superior echelon utilization practices.