On market dynamics of electric vehicle diffusion

A sequential game model is proposed to analyze a two-sided market and indirect network effects involving electrical vehicles (EV) and electric vehicle charging stations (EVCS). The investor maximizes his profit by choosing a set of locations to build charging stations or deferring his investment and earning interest at a fixed rate. The investor also decides the optimal pricing of charging. The consumer, on the other hand, decides whether to purchase an EV or a gasoline vehicle (GV) based on the price of EV, the cost of charging, and the availability of charging stations. The solution of the game provides a closed-form expression of the EV market share as a function of EV price, the price of charging, and the density of charging stations. An asymptotically optimal algorithm is proposed for solving the optimization of the investor's decision.

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