Volume 2 Issue 1 ( March 2015 )

We built a theoretical model of Bertrand competition among joint-venture automobile firms, and examined through numerical simulations the situations in which the Chinese government promotes either hybrid or electric vehicles. We took into account investment ratio regulations with regard to joint ventures and investigated the effects of investment regulations and subsidies that were considered part of environmental policy. Our results indicated that given the high manufacturing cost of electric vehicles and the high level of environmental damage caused by power generation, subsidies relating to hybrid vehicles lead to higher social welfare than those relating to electric vehicles.

Keywords: hybrid vehicles, electric vehicles, investment ratio regulation, subsidy