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Lock-In and the Transition to Hydrogen Cars: Should Governments Intervene?

  • Greaker Mads

    ()

    (Statistics Norway)

  • Heggedal Tom-Reiel

    ()

    (Norwegian School of Management, Oslo)

The density of fuel filling stations influences consumers' utility of private car transport. We investigate the technology choice of firms and consumers in a formal model of the private transport market. Two competing technologies exist; today's internal combustion engine based on fossil fuels, and tomorrow's hydrogen car. Due to network externalities, several market equilibria may exist, of which one is likely to Pareto dominate the other(s). Thus, a lock-in situation is possible. On the other hand, if either the costs of establishing hydrogen filling stations are too high or the hydrogen car technology is still in its infancy, the only equilibrium is the current internal combustion engine equilibrium. Hence, apart from internalizing the environmental externality on gasoline cars, the government has no reason to intervene before the technology is ripe.

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Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 10 (2010)
Issue (Month): 1 (May)
Pages: 1-30

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Handle: RePEc:bpj:bejeap:v:10:y:2010:i:1:n:40
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