Abstract: Rare earth physical government reserves are an important component of China’s rare earth reserve system and are subject to the constraints of rare earth total quantity control indicators. This paper conducts mathematical modeling and decision analysis of the rare earth physical government reserve tenderer model under asymmetric information conditions, focusing on the government’s decision-making when facing two rare earth firms with private information on production costs. In this model, the government determines the main batch and secondary batch reserve quantities of rare earth physical, and the two rare earth firms determine the main and secondary enterprises through sealed bids. Under asymmetric information, the government needs to pay partial information rent to the two firms. The study finds that when the unit market price of rare earth physical in the current period is higher, firms are more likely to sell their products in the current market, leading to higher bid prices. When the main batch reserve quantity determined by the government is larger, according to the government’s tenderer reserve demand, the larger the main batch reserve quantity, the lower the enterprise bid price. When the unit production cost of the firm is higher, the product price is also higher, resulting in a higher bid price. the main batch reserve increases with the increase in the government's expected unit benefit from reserving rare earth physical and the production volume of rare earth physical, and it decreases with the increase in the government’s unit reserve cost, the potential of the current market, the sensitivity coefficient of the current market price, and the upper limit of demand. When the production volume of the firm and the future benefits of reserving physical goods increase, the government will reserve more. When the reserve cost and market demand are high, the government’s reserve will decrease. The government sets the total quantity control indicators for rare earth production based on the unit expected benefit of reserving rare earth physical goods and its relative size compared to the unit reserve cost. Increasing the total quantity control indicators will incentivize firms to increase supply, but the indicators should not be set too high to avoid adverse effects. The research results provide several management insights for jointly optimizing the reserve and pricing of rare earth physical by rare earth firms and for government regulation through total quantity control indicators.