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Game-Theoretic Analysis of Price and Quantity Decisions for Electric Vehicle Supply Chain Under Subsidy Reduction

Jinshi Cheng (), Jiali Wang () and Bengang Gong ()
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Jinshi Cheng: Anhui Polytechnic University
Jiali Wang: Anhui Polytechnic University
Bengang Gong: Anhui Polytechnic University

Computational Economics, 2020, vol. 55, issue 4, No 8, 1185-1208

Abstract: Abstract To avoid the negative effects of electric vehicle (EV) subsidies, the Chinese government has launched an EV subsidy reduction policy, resulting in market uncertainty for EV supply chains. We study the optimal decisions of EV manufacturers and EV sellers by considering the subsidy reduction policy and stochastic demand of the EV market. We develop a newsvendor game model of a two-stage EV supply chain, and analyze how four factors—the degree of subsidy decline, the level of research and development (R&D), market demand, and inventory—affect the two parties’ optimal decisions under centralized and decentralized decision making. Our key results show that: (1) The EV subsidy reduction will not have a significant negative impact on the EV market; (2) The key factors for stimulating the development of the EV market are the R&D level and market demand for EVs, and EV sales are the major contributor to increased EV supply chain profits; (3) Improvement in EV market demand will increase market competition and market vitality; (4) The two decision maker-framework under centralized decision making is more advantageous to the popularization and development of EVs. When centralized decision making is difficult, a coordinated strategy under decentralized decision making can yield the same results as centralized decision making.

Keywords: Supply chain management; Electric vehicle; Newsvendor game model; Subsidy reduction (search for similar items in EconPapers)
JEL-codes: D41 D58 E61 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s10614-018-9856-z

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