Managing Recycling and Echelon Utilization of Power Battery Under Competition and Subsidy

ABSTRACT The rapid growth of new energy vehicles has led to a surge in retired power batteries, necessitating efficient recycling and echelon utilization to address environmental and economic challenges. However, informal recyclers divert a significant portion of retired batteries due to lower compliance costs, leading to suboptimal recovery rates and environmental hazards, which has been considered in previous studies. To address this gap, we examine the optimal strategy for formal recycler, informal recycler, and echelon utilizer under government subsidy, focusing on the competition between the two recyclers. Using a game‐theoretic framework, we analyze four scenarios: no subsidy, subsidizing the formal recycler, subsidizing the echelon utilizer, and subsidizing consumers. We show that subsidizing the echelon utilizer maximizes total supply chain profit, incentivizing higher buy‐back prices and collection quantities. Additionally, government subsidy can increase the buy‐back and transfer prices of retired power batteries and the collection quantity of the formal recycler, but subsidizing the echelon utilizer can reduce the informal recycler's collection quantity. Interestingly, we find that subsidizing the formal recycler or consumers yields identical profits, consumer utilities, and social welfare across supply chain members, as both modes indirectly benefit the formal recycling channel. Moreover, the two subsidy modes can curb the informal recycler's profit. Our study reveals the value of government subsidy in enhancing recycling efficiency in the presence of informal recyclers and can provide insights for managing the recycling and echelon utilization of power batteries under recycling competition.