Optimal switch from a fossil-fueled to an electric vehicle

Falbo P, Ferrari G, Rizzini G, Schmeck MD (2021)
Decisions in Economics and Finance.

Zeitschriftenaufsatz | E-Veröff. vor dem Druck | Englisch
 
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Autor*in
Falbo, Paolo; Ferrari, GiorgioUniBi; Rizzini, Giorgio; Schmeck, Maren DianeUniBi
Abstract / Bemerkung
In this paper we propose and solve a real options model for the optimal adoption of an electric vehicle. A policymaker promotes the abeyance of fossil-fueled vehicles through an incentive, and the representative fossil-fueled vehicle's owner decides the time at which buying an electric vehicle, while minimizing a certain expected cost. This involves a combination of various types of costs: the stochastic opportunity cost of driving one-unit distance with a traditional fossil-fueled vehicle instead of an electric one, the cost associated to traffic bans, and the net purchase cost. After determining the optimal switching time and the minimal cost function for a general diffusive opportunity cost, we specialize to the case of a mean-reverting process. In such a setting, we provide a model calibration on real data from Italy, and we study the dependency of the optimal switching time with respect to the model's parameters. Moreover, we study the effect of traffic bans and incentive on the expected optimal switching time. We observe that incentive and traffic bans on fossil-fueled transport can be used as effective tools in the hand of the policymaker to encourage the adoption of electric vehicles and hence to reduce air pollution.
Stichworte
Electric vehicle adoption; Real options; Stochastic opportunity cost; pollution; Incentives; Optimal stopping
Erscheinungsjahr
2021
Zeitschriftentitel
Decisions in Economics and Finance
ISSN
1593-8883
eISSN
1129-6569
Page URI
https://pub.uni-bielefeld.de/record/2959491

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Falbo P, Ferrari G, Rizzini G, Schmeck MD. Optimal switch from a fossil-fueled to an electric vehicle. Decisions in Economics and Finance. 2021.
Falbo, P., Ferrari, G., Rizzini, G., & Schmeck, M. D. (2021). Optimal switch from a fossil-fueled to an electric vehicle. Decisions in Economics and Finance. https://doi.org/10.1007/s10203-021-00359-2
Falbo, P., Ferrari, G., Rizzini, G., and Schmeck, M. D. (2021). Optimal switch from a fossil-fueled to an electric vehicle. Decisions in Economics and Finance.
Falbo, P., et al., 2021. Optimal switch from a fossil-fueled to an electric vehicle. Decisions in Economics and Finance.
P. Falbo, et al., “Optimal switch from a fossil-fueled to an electric vehicle”, Decisions in Economics and Finance, 2021.
Falbo, P., Ferrari, G., Rizzini, G., Schmeck, M.D.: Optimal switch from a fossil-fueled to an electric vehicle. Decisions in Economics and Finance. (2021).
Falbo, Paolo, Ferrari, Giorgio, Rizzini, Giorgio, and Schmeck, Maren Diane. “Optimal switch from a fossil-fueled to an electric vehicle”. Decisions in Economics and Finance (2021).

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