Incentive mechanism design for electric vehicle battery supply chain under information asymmetry and government intervention

Abstract

Purpose: To settle the recycling ability and effort information asymmetry between manufacturer and recycler in electric vehicle battery supply chain, this paper constructs an information screening mechanism based on the principal-agent theory and evaluates its effectiveness. Two types of recyclers, automobile manufacturers and third-party recycling companies, are discussed separately. Design/methodology/approach: The essence of the information screening mechanism is to design differentiated benefit distributed mechanism according to the recycling ability of the recyclers and to inspire them to make their best effort to recycle. The effectiveness of the mechanism is examined and discussed. In addition, the interaction between the government subsidy and information screening mechanism is further analyzed. Findings: Recyclers are incentivized to truthfully report their recycling capabilities under an optimal benefit distribution mechanism, as this obtains greater rewards than misreporting. Government subsidies can enhance information screening by increasing rewards for recyclers who invest more effort. As rewards per unit of EV battery recycled rise, recyclers' efforts also increase. A higher proportion of capable recyclers reduces the profitability of false reporting while boosting manufacturers’ profits. Originality/value: This paper proposes an information screening mechanism to enhance transparency and efficiency in the EV battery recycling supply chain, addressing information asymmetry. It examines the impact of government subsidy policies on the screening process and analyzes how changes in recycler capabilities influence supply chain dynamics, aiming to develop adaptive coordination mechanisms that support sustainable transportation through improved EV battery recycling.