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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 (MSA's), we find that more than half of the MSA's face critical mass constraints and that a subsidy policy targeting these critical‐mass constrained MSA's could be much more effective in promoting EV adoption than the current uniform policy.

Retailers colocate with rivals to take advantage of economies of agglomeration even though colocation implies greater competition. Using data on all new car transactions registered in Ohio from 2007 to 2014, we estimate a structural model of consumer search for spatially differentiated products that explicitly captures the agglomeration and competition effects of retail colocation. Search frictions generate an average of $333 per car in dealer markups. Agglomeration implies that dealer closures could harm incumbent colocated dealers, even though the incumbent dealers would face less competition. Our results inform the recent policy debate surrounding the massive downsizing of car retail networks and highlight the role of contagion in brick-and-mortar retailing. This paper was accepted by Matthew Shum, marketing.

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