Optimal government scrappage subsidies in the presence of strategic consumers

European Journal of Operational Research, 2021, vol. 288, issue 3, 829-838

Abstract: Many countries have introduced vehicle scrappage programs to motivate consumers to replace their old cars earlier. Since these programs are generally offered over a given period of time, policy makers need to plan for inter-temporal subsidies. Considering a two-period game between strategic consumers and the government, we determine the optimal scrappage subsidy levels. Our results demonstrate that the subsidy level in the second period is higher than in the first, allowing the government to discriminate on price (or subsidy) between consumers with different valuations. In addition, we show that subsidy levels increase with the government’s targeted replacement level. However, when the government target level changes from intermediate to high, the first-period subsidy drops while the second-period subsidy remains unchanged.

Keywords: Vehicle scrappage program; Strategic consumers; Stackelberg game; Government subsidies (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0377221720305609
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:288:y:2021:i:3:p:829-838

DOI: 10.1016/j.ejor.2020.06.017

Access Statistics for this article

European Journal of Operational Research is currently edited by Roman Slowinski, Jesus Artalejo, Jean-Charles. Billaut, Robert Dyson and Lorenzo Peccati

More articles in European Journal of Operational Research from Elsevier
Bibliographic data for series maintained by Catherine Liu ().