Chain-to-chain competition between Electric and Internal Combustion Vehicles supply chains considering pricing, advertisement, carbon emission reduction, and government intervention

This paper investigates the competition between supply chains of New Electric Vehicles (NEV) and Internal Combustion engine Vehicles (ICV). These supply chains include a retailer and a manufacturer. We address the market environmental awareness as the missing link in an automobile supply chain. We formulated a differential game problem that allows us to investigate the decisions which an be dynamic in nature influencing the market in addition to static decisions. Furthermore, we focus on sustainable governmental policies and the impacts of enforcing these policies on demand for electric and gasoline vehicles, manufacturers, and the retailer. We find equilibrium decision variables. Then we analyze the result and propose several insights. For instance, we found thresholds for some parameters that can guarantee the NEV manufacturer gains a high profit, and manufacturers tend to produce NEVs if environmental criteria are imposed in governmental policies. In addition, regardless of any situation, the government is more supportive of both NEV consumers and ICV consumers if and only if environmental criteria are considered in governmental policies. However, if this policy is enforced, the retailer’s prices will be higher for both types of vehicles. In addition, we found that regardless of the situation, ICV manufacturer has to invest more money in green production system than NEV manufacturer.