Cooperate or compete? A strategic analysis of formal and informal electric vehicle battery recyclers under government intervention

We propose a dual-channel reverse supply chain consisting of a formal and an informal electric vehicle battery recycler under government intervention with a subsidy-and-penalty policy. By comparing and analyzing the equilibrium results, profits, and environmental impacts, we discuss the two members’ competition and cooperation strategies under government intervention. Analytical results show that government subsidy to the formal recycler (penalty to the informal recycler) increases (decreases) the two members’ recycling prices at differed rates. Government intervention increases (reduces) the recycling quantity in the formal (informal) recycling channel. The two members can reach a consensus on cooperation only if the subsidy and penalty are set at sufficiently high levels. In this case, the government should push them up as high as its budget allows for environmental benefit.