Technology Adoption and Critical Mass: The Case of the U.S. Electric Vehicle Market

Abstract

The interdependence between electric vehicle (EV) adoption and charging station deployment could lead to multiple equilibria. Under certain market conditions, the issue of critical mass arises and a market failing to overcome this hurdle would revert to a no-adoption outcome. Using panel data of EV sales and charging stations across U.S. Metropolitan Statistical Areas (MSAs), we find that more than half of the MSAs face critical mass constraints and that a subsidy policy targeting these critical-mass constrained MSAs could be much more effective in promoting EV adoption than the current uniform policy.

Keywords: technology adoption, indirect network effects, critical mass, electric vehicles

JEL Classification: Q4, Q5, R4