What question did this study set out to answer?

This research aims to examine the impact of different subsidy designs on electric vehicle (EV) sales and associated product attributes.

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May 6, 2026

Adjustable Product Attributes, Indirect Network Effects, and Subsidy Design: The Case of Electric Vehicles

Key Points

This research aims to examine the impact of different subsidy designs on electric vehicle (EV) sales and associated product attributes.
Developed a structural model of product attribute choice considering indirect network effects.
Analyzed data from the German electric vehicle market.
Investigated effects of varying subsidy types on EV sales, price, and driving range.
Support scheme almost doubled EV sales.
Large purchase subsidies maximized EV sales but led to higher prices and reduced driving range.
Large charging station subsidies improved consumer and total surplus, indicating potential trade-offs.

Abstract

This paper develops a structural model of endogenous product attribute choice in the presence of indirect network effects to study electric vehicle (EV) subsidies. Using data on the German EV market, I find that a support scheme almost doubled EV sales but substantially affected EVs’ price and driving range. These adjustments create a trade-off between optimizing different policy objectives when designing subsidies. Large purchase subsidies maximize EV sales, whereas large charging station subsidies maximize consumer and total surplus. The results suggest that maximizing EV sales can lead to unintended consequences in the form of price and range adjustments. (JEL D12, D22, D85, H25, L14, L62, R41)

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Adjustable Product Attributes, Indirect Network Effects, and Subsidy Design: The Case of Electric Vehicles

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Abstract

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