The chicken-and-egg problem of electric cars

For consumers to adopt electric cars widely, a network of charging stations must be present. However, the development of charging stations is also dependent on the wide circulation of electric cars. Additionally, consumers worry about the tendency for electric vehicles to have a lower driving range than traditional cars. Kevin Remmy built an empirical framework that models consumers’ new car purchase decisions, car producers’ price and range decisions, and charging station entry. He writes that policymakers must understand strategic price and range reactions to subsidies and how they interact with indirect network effects.