A Game Theoretic Approach to Electric Vehicle Promotion Policy Selection from the Consumer Side

With the increasing popularity of electric vehicles (EVs) through purchase subsidy (PS) policies, the personal carbon tax (PCT) policy has been adopted by some countries due to its characteristics of restraining the diffusion of fuel vehicles (FVs) from the consumer side. This paper constructs a three-stage game model consisting of government, manufacturers, and consumers to investigate the impact of basic utility valuation heterogeneity differences on the optimal decisions and to compare the implementation effects of two policies. The results are as follows. First, conventional wisdom suggests that EV consumer surplus under PS policy will exceed that under PCT policy. Surprisingly, our results show that when the basic utility valuation difference is small, the EV consumer surplus under PCT policy exceeds that under PS policy. Second, for manufacturers, it is interesting to note that the sustained impact of PCT policy on promoting the diffusion of the EV market and the profit of the EV manufacturer is related to the basic utility valuation heterogeneity difference. However, compared with PS policy, the implementation of PCT policy has a better restraining effect on the diffusion of the FV market, effectively reducing the demand for FV and the profit of FV manufacturers. Finally, contrary to the common belief that increasing subsidies or raising carbon taxes can increase overall social welfare, this paper shows that subsidies and carbon taxes have a dual impact on overall social welfare, and only when their positive effects outweigh the negative ones can such policies become effective ways of promoting industrial transformation.

Abstract licence: CC BY

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