Welfare Effects of Subsidizing a Dead-End Network of Less Polluting Vehicles
نویسندگان
چکیده
This article shows that in the presence of environmental externalities, it may be welfare enhancing to overcome a technological lock-in by a deadend 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 e↵ect 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 e↵ects. JEL: O33; L92; Q55
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