Contract vs. Subsidy: A Differential Game Analysis for Quality Improvement in the Electric Scooter Supply Chain

As a sustainable mode of transportation, the electric scooter offers residents a low-carbon, convenient, and fast travel option. However, its battery quality problem also brings safety risks that cannot be ignored. We construct eight different differential game models to investigate quality improvement strategies by battery makers and electric scooter manufacturers at the design and manufacturing stages. Our results show that the government subsidy is a better incentive for manufacturers to invest more in quality in the design and manufacturing steps than the cost-sharing contract. This leads to improvements in the product quality of electric scooters. The indicators of the discrete decision-making model without government subsidies and cost-sharing contracts are relatively low. Second, the quality of the electric scooter is affected by several key factors, including time, quality decay coefficient, and income distribution coefficient. Specifically, the quality of electric scooter products exhibits a positive correlation with time but gradually declines as the quality decay coefficient increases. Third, through specific numerical analyses, we further find that the income distribution coefficient affects the manufacturer’s product quality inputs in the design and manufacturing process, the optimal revenues of upstream and downstream manufacturers, the cost-sharing ratio, and the government subsidy rate to varying degrees.