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

Antje-Mareike Dietrich () and Gernot Sieg

Networks and Spatial Economics, 2014, vol. 14, issue 3, 335-355

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

Keywords: Environmental externalities; Network effects; Private transport; Technological change; O33; L92; Q55 (search for similar items in EconPapers)
Date: 2014
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Related works:
Working Paper: Welfare Effects of Subsidizing a Dead-End Network of Less Polluting Vehicles (2013)
Working Paper: Welfare effects of subsidizing a dead-end network of less polluting vehicles (2011)
Working Paper: Welfare effects of subsidizing a dead-end network of less polluting vehicles (2011)
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DOI: 10.1007/s11067-014-9229-7

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