A quantitative model of accelerated vehicle‐retirement induced by subsidy

A number of accelerated vehicle‐retirement programs have been implemented by private companies and public agents to reduce pollution and promote environment friendly technology. Our paper examines subsidy programs for the acquisition of a new low‐pollution vehicle, provided that an old technology unit is retired. A model is developed to determine the appropriate subsidy level that induces the replacement of a specified number of existing old technology units within a given time period. Alternatively, given the subsidy level, the model allows the determination of the required time period to achieve a desired replacement target. In this way, the proposed method could be used to assess the effectiveness of a subsidy‐based policy of accelerated vehicle‐retirement in reaching a targeted number of scraped vehicles within a specified time framework.