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The power battery is the core of a new energy vehicle and plays a vital role in the rise of the new energy vehicle industry. As the number of waste batteries increases, firms involved in the industry need to properly dispose them, but what party is responsible remains unclear. To reduce environmental impacts, governments introduce two subsidy policies, i.e. collection subsidies, which are provided to the collecting firms, and dismantling subsidies, which are provided to the dismantling firms.

Based on the different characteristics of the subsidies, we develop a stylized model to examine the collection strategies and the preferences over the subsidies.

We derive several insights from analysis. First, the collection strategies depend on the fixed collection cost. Second, the key factor determining the firm's subsidy preference is the efficiency of dismantling. Finally, if the primary target is the collection rate, governments prefer to provide collection subsidies. If consider the environmental impact, the choice of subsidies has to do with the efficiency of dismantling. Moreover, from a social welfare perspective, the raw material cost and the efficiency of dismantling are core indicators of decision.

This work develops the first analytical model to study two power battery subsidies and investigate the optimal collecting strategies and subsidy preferences. The insights are compelling not only for the manufacturer and the third party but also for policymakers.

The peer review history for this article is available at: https://publons.com/publon/10.1108/IMDS-08-2019-0450

Build-operate-transfer (BOT) contracts are widely used in the construction and operation of charging piles for new energy vehicles worldwide and stipulate that governments grant charging pile operators franchises for a certain period of time to invest in the construction and operation of the charging piles. The charging piles are then transferred to governments when the concession expires. To encourage charging pile operators to build and operate charging piles, governments usually provide two kinds of subsidies, namely construction and operating subsidies.

The authors establish a typical game model to study the optimal BOT contract between a government and a charging pile operator and their preferences for the two kinds of subsidies.

First, the authors show that there are substitution and complementarity effects between the concession period and the subsidy level. Second, the operator prefers the construction subsidy (operating subsidy) when the additional operating cost is low (high). The government prefers the operating subsidy (construction subsidy) when consumer sensitivity to the number of charging piles is low (high) and the concession period is short or long (moderate). Finally, the adjusted joint subsidy can not only improve social welfare but also that the charging pile operator can obtain the same profit as under the operating subsidy at a lower subsidy amount.

This work develops the first analytical model to study two subsidies in the construction and operation of charging piles and investigate the optimal BOT contract and subsidy preferences. The insights are compelling not only for the charging pile operator but also for policymakers in practice from a circular economy perspective.