@techreport{7e706e996ecc4ddcb4158d5cb82beb65,
title = "A Subsidy Inversely Related to the Product Price",
abstract = "This paper proposes a new subsidy scheme for promoting a target good{\textquoteright}s consumption, where subsidy payment is inversely related to the good{\textquoteright}s price. Under imperfect competition, this scheme makes the demand faced by producers more elastic, thereby reducing their power to raise prices and increasing subsidy pass-through to consumers. Compared to commonly-used specific or ad valorem subsidies, it can lower government expenditure for inducing a given output, and flexibly adjust the incidence on producers. Simulations based on an actual U.S. subsidy programme on electric vehicles indicate up to 50–81% reductions in government spending if it replaces the current specific subsidy.",
keywords = "Subsidy efficiency, Subsidy incidence, Imperfect competition, Cournot oligopoly, Electric vehicles",
author = "Takahiko Kiso",
year = "2018",
language = "English",
series = "Discussion Papers in Economics and Finance",
publisher = "University of Aberdeen Business School",
number = "9",
type = "WorkingPaper",
institution = "University of Aberdeen Business School",
}