Adjustable Product Attributes, Indirect Network Effects, and Subsidy Design: The Case of Electric Vehicles

Kevin Remmy ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: This paper develops a structural model of endogenous product attribute choice in the presence of indirect network effects to study electric vehicle (EV) subsidies. Using data on the German EV market from 2012-2018, I find that a support scheme increased EV sales by 98% but led to strong range distortions. When designing subsidies, these distortions create a trade-off between optimizing different policy objectives. Large purchase subsidies maximize EV sales whereas large charging station subsidies maximize consumer and total surplus. The results suggest that policymakers should carefully weigh the benefits of increasing EV sales against the distortions this causes.

Keywords: network externalities; product attribute choice; elctric vehicles; subsidies (search for similar items in EconPapers)
JEL-codes: D12 D62 H23 L62 Q55 (search for similar items in EconPapers)
Pages: 49
Date: 2022-02
New Economics Papers: this item is included in nep-com, nep-dcm, nep-ene, nep-reg and nep-tre
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2022_335

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