R&D Investment Strategies for New Energy Vehicles Firm Based on Consumers’ Preference and Government Subsidy

Abstract

Under the assumption that the emergence and expansion of the new energy vehicles market is due to consumer groups entering market sequentially, and the size and characteristics of each consumer group are different, this paper proposes the R&D investment model of a new energy vehicles firm based on product subsidy. The firm’s optimal R&D investment and pricing strategies are given through theoretic analysis. It is found that when the initial value of the firm’s marginal profits is positive, the optimal R&D investment strategy is to make its marginal profits equal zero if its R&D funds is sufficient enough, otherwise, the optimal R&D investment strategy is its whole R&D funds. And when the initial value of the firm’s marginal profits is non-positive, its optimal R&D investment strategy is zero. It is also found that there is a crowding-in effect of product subsidy on the firm’s R&D investment under two conditions: only if the unit product subsidy is large enough when the firm doesn’t conduct R&D without subsidy, and if only the firm has surplus R&D funds when the firm has conducted R&D without subsidy.