The Art of Balancing Price and Plug: Developing a Theoretical Model for Dynamic Pricing in the Electric Vehicle Market

Zhining Jia, Qi Chen () and Qi Xu
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Zhining Jia: Puxi Branch, Bank of Shanghai, Shanghai 200231, China
Qi Chen: School of Economics and Management, Shanghai Open University, Shanghai 200433, China
Qi Xu: Glorious Sun School of Business and Management, Donghua University, Shanghai 200051, China

Sustainability, 2024, vol. 16, issue 21, 1-23

Abstract: This study presents a novel approach to understanding the complex dynamics of the electric vehicle (EV) market through the lens of differential game theory. We developed a comprehensive model that captures the strategic interactions between EV manufacturers and charging network operators, while incorporating the effects of consumer behavior, market uncertainties, and reference price effects. Using differential game theory, we examined the impact of reference price effects and the charging network’s influence on pricing strategies, focusing on three distinct approaches: basic pricing, static pricing considering reference price effects, and dynamic pricing strategies. Our model offers new insights into consumer behavior and price expectations in the rapidly evolving EV market. The key findings reveal that under static or dynamic pricing strategies, the optimal pricing for EV manufacturers is positively correlated with the initial reference price. When the initial reference price is high (low), the optimal pricing strategy resembles skimming pricing (penetration pricing). As the effort level of charging network operators increases and their influence on consumers’ purchase decisions grows stronger, EV manufacturers tend to set higher prices. Notably, while dynamic pricing strategies can optimize EV manufacturers’ profits, the profits of charging network operators may decrease compared with static pricing strategies. This integrated approach significantly contributes to the field by bridging gaps among market dynamics, pricing strategies, and the infrastructure’s development in the context of electric mobility, providing a comprehensive framework for understanding and optimizing the EV ecosystem. Ultimately, this study advances sustainable business models that balance profitability, consumer behavior, and the infrastructure’s growth in the rapidly evolving EV market.

Keywords: electric vehicles; differential games; pricing strategies; charging infrastructure; sustainable transportation (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
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