Publication Date:
2019-10-01
Description:
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. (JEL H23, H76, L13, L63, Q42, Q48)
Print ISSN:
1945-7782
Electronic ISSN:
1945-7790
Topics:
Economics
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