Welfare effects of subsidizing a dead-end network of less polluting vehicles

Antje-Mareike Dietrich and Gernot Sieg

MPRA Paper from University Library of Munich, Germany

Abstract: This article shows that in the presence of environmental externalities, it may be welfare enhancing to overcome a technological lock-in by a dead- end technology through governmental intervention. It is socially desirable to subsidize a dead-end technology if its environmental externality is small relative to the one of the established technology, if the installed base and/or the strength of the network effect is small and if future generations matter. Applying our results to the private transport sector, governments promoting alternatives to gasoline-driven vehicles have to be aware of these opposing welfare effects.

Keywords: environmental externalities; network effects; private transport; technological change (search for similar items in EconPapers)
JEL-codes: L92 O33 Q55 (search for similar items in EconPapers)
Date: 2011-09-28
New Economics Papers: this item is included in nep-cwa, nep-ene, nep-env and nep-reg
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Related works:
Journal Article: Welfare Effects of Subsidizing a Dead-End Network of Less Polluting Vehicles (2014)
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)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:33780

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