Attribute-based Subsidy Can Affect Consumers’ BEV Purchase Decision
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We examine the effectiveness of government financial subsidies on battery electric vehicle (BEV) purchasing behavior using a discrete choice model. By optimizing a representative consumer’s decision-making model, we demonstrate that the effectiveness of f inancial subsidies depend on the price elasticity of BEV demand. By analyzing a dataset of individual consumers’ BEV purchase records, we validate our theoretical argument that financial subsidies can encourage consumers to choose eco-friendly BEV models when demand is price elastic. Our findings reveal that South Korean central government subsidies, tailored to the environmental characteristics of EVs, positively influence the sales of eco-friendly BEV models in a price-elastic market. Our results imply that governments should carefully design subsidy policies based on the price elasticity of BEV model demand to maximize their environ mental impact.
Abstract
We examine the effectiveness of government financial subsidies on battery electric vehicle (BEV) purchasing behavior using a discrete choice model. By optimizing a representative consumer’s decision-making model, we demonstrate that the effectiveness of f inancial subsidies depend on the price elasticity of BEV demand. By analyzing a dataset of individual consumers’ BEV purchase records, we validate our theoretical argument that financial subsidies can encourage consumers to choose eco-friendly BEV models when demand is price elastic. Our findings reveal that South Korean central government subsidies, tailored to the environmental characteristics of EVs, positively influence the sales of eco-friendly BEV models in a price-elastic market. Our results imply that governments should carefully design subsidy policies based on the price elasticity of BEV model demand to maximize their environ mental impact.