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Title: Regulatory Mandates and Electric Vehicle Product Variety

Citation Type: Working Paper

Publication Year: 2022

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Abstract: When should policies to encourage new types of products use supply-side tools, like regulations and mandates, and when should they use demand-side tools like consumer incentives? When prices are set nationally but policy varies by state, supply-side and demand-side tools are no longer equivalent. We study an important state-level supply-side policy in the early electric vehicle industry: the zero-emission vehicle mandate in California and nine other states. Focusing on the 2009–17 period, we examine two channels for policy effects: imperfect competition and endogenous product entry. Using a structural model of new vehicle pricing, demand, and product entry, we compare the mandate to a counterfactual demand-side policy that instead uses a consumer subsidy and tax. Holding fixed the regulator’s stated target, electric vehicle sales in regulated states, the demand-side policy creates a weaker incentive for socially beneficial product entry and generates lower consumer and total surplus. When fewer products are introduced, producers avoid entry costs, but forego long-run benefits of entry.

Url: https://www.frankpinter.com/Pinter_JMP.pdf

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Authors: Armitage, Sarah; Pinter, Frank

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Institution: Harvard University

Pages: 1-74

Publisher Location: Cambridge

Data Collections: IPUMS USA, IPUMS NHGIS

Topics: Other

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