Heterogeneity of Indirect Network Effects: Empirical Analysis of the Chinese Electric Vehicle Market

62 Pages Posted: 28 Dec 2023

See all articles by Jianwei Xing

Jianwei Xing

Peking University - National School of Development

Junji Xiao

Lingnan University

Jiming Wang

Pennsylvania State University

Xiaodan Guo

Dongbei University of Finance and Economics

Date Written: December 22, 2023

Abstract

Governments can expedite technology adoption by directly subsidizing a technology or supporting the adoption of its complements, especially in the presence of indirect network effects. In this study, we explore the heterogeneity of these indirect network effects arising from variations in product quality and characteristics within the market. Utilizing data on electric vehicle (EV) sales and charger numbers in China, this paper examines the indirect network effects between EV adoption and charging station infrastructure in the world’s largest EV market. Additionally, we assess the effectiveness of EV purchase subsidies and charger subsidies in driving EV adoption. Our findings reveal that the magnitude of the indirect network effects on EV adoption depends on the specific characteristics of vehicles available in the market. Moreover, we observe distinct impacts of the purchase subsidy and charger subsidy on the distributions of EV sales: EV purchase subsidies primarily benefit high-range vehicles and their buyers, while charger subsidies favor low-range vehicles and their buyers.

Keywords: indirect network effect, subsidy, electric vehicles, welfare analysis

JEL Classification: H23, D61, L62

Suggested Citation

Xing, Jianwei and Xiao, Junji and Wang, Jiming and Guo, Xiaodan, Heterogeneity of Indirect Network Effects: Empirical Analysis of the Chinese Electric Vehicle Market (December 22, 2023). Available at SSRN: https://ssrn.com/abstract=4672874 or http://dx.doi.org/10.2139/ssrn.4672874

Jianwei Xing (Contact Author)

Peking University - National School of Development ( email )

Beijing, 100871
China

Junji Xiao

Lingnan University ( email )

Jiming Wang

Pennsylvania State University ( email )

Xiaodan Guo

Dongbei University of Finance and Economics ( email )

China

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