Welfare effects of subsidizing a dead-end network of less polluting vehicles
AbstractThis article shows that in the presence of environmental externalities, it may be welfare enhancing to overcome a technological lock-in by a dead- end technology through governmental intervention. It is socially desirable to subsidize a dead-end technology if its environmental externality is small relative to the one of the established technology, if the installed base and/or the strength of the network effect is small and if future generations matter. Applying our results to the private transport sector, governments promoting alternatives to gasoline-driven vehicles have to be aware of these opposing welfare effects.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 33780.
Date of creation: 28 Sep 2011
Date of revision:
environmental externalities; network effects; private transport; technological change;
Other versions of this item:
- Antje-Mareike Dietrich & Gernot Sieg, 2013. "Welfare Effects of Subsidizing a Dead-End Network of Less Polluting Vehicles," Working Papers 20, Institute of Transport Economics, University of Muenster.
- Dietrich, Antje-Mareike & Sieg, Gernot, 2011. "Welfare effects of subsidizing a dead-end network of less polluting vehicles," Economics Department Working Paper Series 12, Technische Universität Braunschweig, Economics Department.
- L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation
- Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-10-09 (All new papers)
- NEP-CWA-2011-10-09 (Central & Western Asia)
- NEP-ENE-2011-10-09 (Energy Economics)
- NEP-ENV-2011-10-09 (Environmental Economics)
- NEP-REG-2011-10-09 (Regulation)
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