The effects of public subsidies on emerging industry: An agent-based model of the electric vehicle industry

Public subsidies are widely used as policy incentives to promote strategic industry development, especially in emerging industries that depend heavily on the use of new technologies. This study explores the differential effects of consumer subsidies and manufacturer subsidies on the development of new technology in the electric vehicle industry. An agent-based simulation model is constructed which fully considers the individual heterogeneity of consumers and manufacturers in decision-making, with the parameter settings derived from the data of the U.S. automobile market in 2010. Based on robustness tests, the findings suggest that consumer subsidy is more effective than manufacturer subsidy in promoting the popularity and technological breakthrough of electric vehicles. Subsidy intensity and duration are indicated to be important factors for policy effectiveness.