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Seoul Journal of Economics - Vol. 38 , No. 2
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Seoul Journal of Economics - Vol. 38, No. 2, pp. 159-193
Abbreviation: SJE
ISSN: 1225-0279 (Print)
Print publication date 31 May 2025
Received 17 Jan 2025 Revised 17 Mar 2025 Accepted 26 Mar 2025
DOI: https://doi.org/10.22904/sje.2025.38.2.002

Attribute-based Subsidy Can Affect Consumers’ BEV Purchase Decision
Jiye Ryu ; KiHoon Hong ; Jinhee Kim
Jiye Ryu : Hongik University, 94 Wausan-ro, Mapo-gu, Seoul, South Korea
KiHoon Hong : Hongik University, 94 Wausan-ro, Mapo-gu, Seoul, South Korea
Jinhee Kim (Corresponding author): Hongik University, 94 Wausan-ro, Mapo-gu, Seoul, South Korea, Tel: +82-2-320-2152 (jh_kim@hongik.ac.kr)

Funding Information ▼

JEL Classification: D12, H23, Q58, R41

Abstract

We examine the effectiveness of government financial subsidies on battery electric vehicle (BEV) purchasing behavior using a discrete choice model. By optimizing a representative consumer’s decision-making model, we demonstrate that the effectiveness of financial subsidies depend on the price elasticity of BEV demand. By analyzing a dataset of individual consumers’ BEV purchase records, we validate our theoretical argument that financial subsidies can encourage consumers to choose eco-friendly BEV models when demand is price elastic. Our findings reveal that South Korean central government subsidies, tailored to the environmental characteristics of EVs, positively influence the sales of eco-friendly BEV models in a price-elastic market. Our results imply that governments should carefully design subsidy policies based on the price elasticity of BEV model demand to maximize their environmental impact.

Keywords: Financial subsidies, Consumer behavior, Electric vehicles, Eco-innovation
Acknowledgments

This work was supported by 2025 Hongik University Research Fund.

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