Impact of government subsidy on the optimal R&D and advertising investment in the cooperative supply chain of new energy vehicles. (May 2022)

• Record Type: Journal Article
• Authors: Sun, Ya-Fang; Zhang, Yue-Jun; Su, Bin
• Is Part Of: Energy policy. Volume 164(2022)
• Publication Date: 2022-05
• Subjects: Government subsidy -- R&D investment -- Advertising investment -- Profits of supply chain -- Social welfare -- New energy vehicles; Energy policy -- Periodicals; Politique énergétique -- Périodiques; Electronic journals; 333.79
• DOI: 10.1016/j.enpol.2022.112885
• Languages: English
• ISSNs: 0301-4215

Abstract

Abstract: Government subsidy is fairly important to alleviate the funding dearth of new energy vehicles (NEVs) industry, and mainly includes production-side and consumption-side subsidies. Nevertheless, it is unclear how government makes the optimal subsidy strategy at diverse research and development (R&D) stages of NEVs, and how the cooperative NEVs supply chain makes the optimal investment in R&D and advertising. Thus, this paper adopts the Stackelberg game, Nash equilibrium and the optimal profit models to address these issues and further conducts the case study with the NEVs data of BYD in China. The results indicate that when the effectiveness of per unit of investment in R&D ( α ) and advertising ( β ) in generating the sales of NEVs is lower than 0.574 in the region of 0 < α 2 + β 2 < 0.33, consumption-side subsidy can better improve the investment in R&D and advertising, profits and social welfare than production-side subsidy, but when it is lower than 1.414 in the region of 1 < α 2 + β 2 < 2, production-side subsidy may perform better. Meanwhile, to maximize social welfare, government pays the highest subsidy when adopting the consumption-side subsidy, followed by the subsidy for per unit production of NEVs and R&D investment, respectively. The case study further proves that the results support the practice. Highlights: The consumption-side subsidy performs best at the early R&D stage of NEVs. Subsidy for per unit production of NEVs performs best at the middle R&D stage. Subsidy for R&D investment is suitable for the late R&D stage of NEVs. The consumption-side subsidy for NEVs is much higher than production-side subsidy. The case study proves that the results support the practice.