American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Adjustable Product Attributes, Indirect Network Effects, and Subsidy Design: The Case of Electric Vehicles
American Economic Journal: Economic Policy
(pp. 107–40)
Abstract
This paper develops a structural model of endogenous product attribute choice in the presence of indirect network effects to study electric vehicle (EV) subsidies. Using data on the German EV market, I find that a support scheme almost doubled EV sales but substantially affected EVs' price and driving range. These adjustments create a trade-off between optimizing different policy objectives when designing subsidies. Large purchase subsidies maximize EV sales, whereas large charging station subsidies maximize consumer and total surplus. The results suggest that maximizing EV sales can lead to unintended consequences in the form of price and range adjustments.Citation
Remmy, Kevin. 2026. "Adjustable Product Attributes, Indirect Network Effects, and Subsidy Design: The Case of Electric Vehicles." American Economic Journal: Economic Policy 18 (2): 107–40. DOI: 10.1257/pol.20230294Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- D22 Firm Behavior: Empirical Analysis
- D85 Network Formation and Analysis: Theory
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- L14 Transactional Relationships; Contracts and Reputation; Networks
- L62 Automobiles; Other Transportation Equipment; Related Parts and Equipment
- R41 Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise