Engines Powered by Renewable Energy, the Network of Filling Stations and Compatibility Decisions
The paper addresses entry barriers for a new technology - hydrogen powered cars or cars with fuel cell engines - if the network of its filling stations is missing. We use Hotelling’s model of product differentiation to characterize a situation where an incumbent firm produces the old technology, compatible with the existing network of filling stations, and an entrant, who cannot use this network. The oil companies myopically support the use of the original technology based on fossil fuel by following Hotelling’s pricing rule. This encourages the entrant to invest in compatibility. The entrant with the new technology is a Stackelberg leader while the old technology firm is the follower. In the first stage, the entrant invests in the network of filling stations and in the second stage both compete in prices, given the network situation. These two-step models are repeated until the network is compatible or the oil is exhausted. The main positive result is that the fossil fuel powered cars see their market share and profitability decline over time, while the hydrogen firm increasingly prospers. These trends are stronger the stronger are the consumers’ environmental concerns. On the normative side, the privately optimal pace of investment is slower than the socially optimal pace of investment, suggesting policies that would foster the introduction of the hydrogen technology.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 229 (2009)
Issue (Month): 4 (August)
|Contact details of provider:|| Web page: http://www.degruyter.com|
|Order Information:||Web: http://www.degruyter.com/view/j/jbnst|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Shy,Oz, 2001.
"The Economics of Network Industries,"
Cambridge University Press, number 9780521805001, September.
- Economides, Nicholas, 1996.
"The economics of networks,"
International Journal of Industrial Organization,
Elsevier, vol. 14(6), pages 673-699, October.
- Klaus Conrad, 2005. "Price Competition and Product Differentiation When Consumers Care for the Environment," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 31(1), pages 1-19, 05.
- Crampes, Claude & Hollander, Abraham, 1995.
"Duopoly and quality standards,"
European Economic Review,
Elsevier, vol. 39(1), pages 71-82, January.
- Crampes, C. & Hollander, A., 1991. "Duopoly and Quality Standards," Cahiers de recherche 9128, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Crampes, C. & Hollander, A., 1991. "Duopoly and Quality Standards," Cahiers de recherche 9128, Universite de Montreal, Departement de sciences economiques.
- Crampes, C. & Hollander, A., 1992. "Duopoly and Quality Standards," Papers 92.g, Toulouse - GREMAQ.
- Chou, Chien-fu & Shy, Oz, 1993. "Partial compatibility and supporting services," Economics Letters, Elsevier, vol. 41(2), pages 193-197.
- Church, Jeffrey & Gandal, Neil, 1996.
"Strategic entry deterrence: Complementary products as installed base,"
European Journal of Political Economy,
Elsevier, vol. 12(2), pages 331-354, September.
- Church, J. & Gandal, N., 1993. "Strategic Entry Deterrence: Complementary Products as Installed Base," Papers 16-93, Tel Aviv.
- Mads Greaker, 2006. "Eco-labels, Trade and Protectionism," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 33(1), pages 1-37, 01.
- Katz, Michael L & Shapiro, Carl, 1986. "Technology Adoption in the Presence of Network Externalities," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 822-41, August.
- Katz, Michael L & Shapiro, Carl, 1992. "Product Introduction with Network Externalities," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 55-83, March.
- Klaus Conrad, 2006. "Price Competition and Product Differentiation when Goods have Network Effects," German Economic Review, Verein für Socialpolitik, vol. 7, pages 339-361, 08.
- Michael L. Katz & Carl Shapiro, 1994. "Systems Competition and Network Effects," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 93-115, Spring.
When requesting a correction, please mention this item's handle: RePEc:jns:jbstat:v:229:y:2009:i:4:p:362-381. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.