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Optimal policy and network effects for the deployment of zero emission vehicles

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  • Meunier, Guy
  • Ponssard, Jean-Pierre

Abstract

We analyze the impact of indirect network effects in the deployment of zero emission vehicles in a static partial equilibrium model. In most theoretical analyses, direct and indirect effects are conflated, and relatively few authors have explicitly considered indirect network effects. We also introduce the market power of vehicle producers and scale effects in the production function. The model exhibits a multiplicity of local social critical points and market equilibria, suggesting a possibility of lock-in. The optimal two subsidies for vehicles and stations are derived so that the Pareto dominating market equilibrium would coincide with the social optimum. Configurations associated with different values of the parameters are explored to revisit the policy issues at various stages of deployment of hydrogen and battery electric vehicles.

Suggested Citation

  • Meunier, Guy & Ponssard, Jean-Pierre, 2020. "Optimal policy and network effects for the deployment of zero emission vehicles," European Economic Review, Elsevier, vol. 126(C).
  • Handle: RePEc:eee:eecrev:v:126:y:2020:i:c:s0014292120300817
    DOI: 10.1016/j.euroecorev.2020.103449
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    Cited by:

    1. Li,Shanjun & Zhu,Xianglei & Ma,Yiding & Zhang,Fan & Zhou,Hui, 2020. "The Role of Government in the Market for Electric Vehicles : Evidence from China," Policy Research Working Paper Series 9359, The World Bank.

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    More about this item

    Keywords

    Network effects; Technology deployment; Lock-in; Optimal policy;
    All these keywords.

    JEL classification:

    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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