Job Market Paper


Market Power and Long-Run Technology Choice in the U.S. Electricity Industry


I analyze how electricity suppliers use their long-run portfolio decisions to exert market power in the short-run energy market. Theory suggests that firms with market power will distort their technology mix away from what a least-cost planner would choose. The effect of market power on long-run capacity choices is especially important as firms in the United States are retiring record amounts of coal capacity, concerning regulators. I employ a structural model to analyze oligopolistic firms' decisions and test regulators' proposed policies. I find that firms with market power significantly depart from a planner's first-best: retiring almost ten times the coal capacity a planner would choose. Mandating oligopolists to retain coal capacity, but still allowing them to exert short run market power, only saves consumers 1% off electricity bills. Incentivizing firms to retain coal capacity with fixed-cost subsidies, a policy several states have considered, is relatively expensive and outweighs any spot-market benefit.


Antitrust and Common Ownership: Evidence from the New England Electricity Market


I use reduced form and structural modeling approaches to test for evidence that common ownership of rival firms raises prices in the New England electricity market. A firm that shares an owner with a rival firm has an incentive to soften product market competition. Finding evidence of this phenomenon is important as large institutional investors increasingly own major stakes of competing firms, to the concern of regulators. My reduced form results imply that common ownership increases the average price of electricity by 5.5%. This is in line with results from my structural model which imply common ownership raises prices by 8.6%. However, the results from the structural model where firms do not take common owners' profits into account when making strategic decisions is more consistent with the true data. In a setting where firms account for their common owners' profits, a proposed regulation to limit the stakes of ownership in competing firms to at most 1% saves consumers 6.3% on their electricity bills and increases total surplus.