Dynamic decision-making in electric vehicle battery closed-loop supply chain with a reward-penalty mechanism

Abstract

As environmental concerns grow, governments have introduced regulations for enterprises to manage the recycling of end-of-life products. This research investigates how closed-loop supply chain (CLSC) participants make decisions dynamically under a government-driven reward-penalty mechanism. Focusing on a CLSC for the manufacturer investing in the quality design of electric vehicle (EV) batteries, we propose three manufacturer-led Stackelberg game models, solved through differential game theory and Bellman theory. To boost profits, the manufacturer focuses on optimizing the retailer's and third-party recycler's decisions. Analyses reveal the following three intriguing insights: first, the manufacturer engaged in recycling achieves the highest CLSC value function and economic benefits, with recycling activities offering environmental advantages. Moreover, the manufacturer earns a higher reward when recycling waste EV batteries. However, there is no strong correlation between the quality of EV batteries and the reward or the recycling rate. Lastly, the policy has a positive impact on recycling activities, especially when the manufacturer manages the collection process. As the recycling rate stabilizes, reward-penalty intensity fluctuations fade, suggesting that government intervention is necessary to avoid excessive participation and avoidable expenses.