Pass-Through as a Test for Market Power: An Application to Solar Subsidies
Name
app.20170611.pdf
Description
Published version
Size
895.6 KB
Format
Adobe PDF
Checksum (MD5)
d0b02e6bff1fb9fd0985cfd815f6e567
Author(s)
Pless, Jacquelyn
van Benthem, Arthur A.
Date Issued
October 2019
Journal
AEJ: Applied Economics
Publisher
American Economic Association
Citation
Pless, Jacquelyn and Arthur A. van Benthem. "Pass-Through as a Test for Market Power: An Application to Solar Subsidies." AEJ: Applied Economics 11, 4 (October 2019): 367-401.
Version
Final published version
Abstract
We formalize pass-through over-shifting as a simple yet underutilized test for market power. We apply this test in the market for solar energy. Specifically, we estimate the pass-through of solar subsidies to solar system prices using rich micro-level transaction and subsidy data from California. Buyers of solar systems capture nearly the full subsidy, while there is more-than-complete pass-through to lessees. We conclude that solar markets are imperfectly competitive by ruling out alternative explanations for over-shifting and reinforce this conclusion with a test of solar demand curvature. This procedure can serve to detect market power beyond the solar market.
MIT Department
Sloan School of Management
Terms of Use
Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.1257/app.20170611
