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Welfare Effects of Subsidizing a Dead-End Network of Less Polluting Vehicles

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  • Antje-Mareike Dietrich
  • Gernot Sieg

Abstract

Overcoming a technological lock-in by means of governmental intervention may be welfare enhancing, even if the implemented technology will be replaced by a better one at a certain time in the future. This holds, if the environmental externality of the implemented technology is small relative to that of the established technology and/or if the network effect of the installed base of service stations is small. If consumers’ and politicians’ discounting of future payoffs is high, the implementation even of dead-end technologies could be sensible, but policy makers with higher preferences for future payoffs may decide not to overcome lock-in by a new green, but dead-end technology. Governments promoting alternatives to gasoline-driven vehicles must be aware of opposing welfare effects for open-ended and dead-end technologies. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Antje-Mareike Dietrich & Gernot Sieg, 2014. "Welfare Effects of Subsidizing a Dead-End Network of Less Polluting Vehicles," Networks and Spatial Economics, Springer, vol. 14(3), pages 335-355, December.
    • Handle: RePEc:kap:netspa:v:14:y:2014:i:3:p:335-355
    DOI: 10.1007/s11067-014-9229-7
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    Cited by:

    1. Dietrich, Antje-Mareike, 2017. "Platform intermediation to sponsor alternative fuel vehicles," Transport Policy, Elsevier, vol. 54(C), pages 90-99.
    2. Dietrich, Antje-Mareike, 2016. "Governmental platform intermediation to promote alternative fuel vehicles," Economics Department Working Paper Series 16, Technische Universität Braunschweig, Economics Department.

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    More about this item

    Keywords

    Environmental externalities; Network effects; Private transport; Technological change; O33; L92; Q55;
    All these keywords.

    JEL classification:

    • 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, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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