Subsidising an electric vehicle supply chain with imperfect information

This paper studies a four-echelon vehicle supply chain consisting of government, an electric/gasoline vehicle manufacturer, a retailer and consumers. The purpose is to understand how government subsidies should be allocated in order to maximise total profit of the whole supply chain. By adopting Stackelberg game theory based on conditions of imperfect information, a mathematical model was developed. The results suggest that allocation of a subsidy in the electric vehicle supply chain should first be allotted for electric vehicle customers. Specifically, in the early development stage, if the subsidy budget is limited, all of them should be given to the purchasers of electric vehicle customer. With an increasing budget available for subsidies, more allocation to the electric vehicle manufacturer is expected. However, more subsidies does not necessarily lead to more electric vehicle purchases as there is a ceiling on the market for electric vehicles. In the later development stage, subsidies may not be important in promoting electric vehicle uptake.