Research
Working Papers
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Subsidizing Crises: Evidence from Norway's Electricity Market
(with Loreta Rapushi and Ritvana Rrukaj)
February 2026
View Abstract
We examine consumer responses to the 2022 European Energy Crisis, using Norway’s zonal electricity market and the start of a subsidy policy as a natural experiment. Employing administrative consumption records from over 1.5 million households and a differences-in-differences approach, we show that zones more interconnected with Europe experienced a 7–9% reduction in household electricity consumption relative to zones less interconnected, with effects persisting for several months. Using a triple-difference approach, we find that heterogeneity in treatment effects is driven by household characteristics. Finally, exploiting the kink in the support schedule and using high-frequency data, we estimate local demand responsiveness at the point where the subsidy becomes binding. Overall, households reduced consumption, indicating that consumers adapted to the new high-price environment and viewed the subsidy as temporary, rather than responding in a conventional way to the immediate price relief.
[Download paper]R&R Journal of Environmental Economics and Management
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Renewable Portfolio Standards, Vertical Structure, and Investment
(with Harim Kim)
January 2026
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Policy effectiveness within industries depends on market structures. We provide evidence of this by examining how vertical structure influences renewable capacity investments under Renewable Portfolio Standards (RPS). RPS link the upstream and downstream electricity sectors by mandating downstream firms to procure a fraction of sales from renewables. Considering various channels through which downstream firms can source investment to comply, we show that RPS-driven investments vary across states with different degrees of vertical integration in their electricity sector. We find lower investments in more vertically separated states, suggesting that the policy provides different incentives depending on the underlying market structure.
[Download paper]R&R Resource and Energy Economics
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Firms' Bidding Behavior in a New Market: Evidence from Renewable Energy Auctions
(with Stefan Lamp and Silvana Tiedemann)
July 2025
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Auctions are increasingly used by governments to select suppliers and determine levels of policy support. In the context of renewable energy (RE) investment, they have become dominant in the ongoing energy transition. Using unique bid-level data from German RE auctions (2015-2019), this paper documents bidding behavior and recovers bidders' costs under uniform and pay-as-bid pricing rules by estimating a structural model of multi-unit auctions that accounts for future cash flows from subsidies. By conducting counterfactual analyses on the impact of switching to a non-discriminatory auction, we find that such a change may have reduced subsidy expenditures and mitigated market power.
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Personalized Pricing and the Value of Past Purchase Histories: An Empirical Perspective
(with Isis Durrmeyer and Jean-Francois Fournel)
October 2025
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Our analysis uses data on prices, aggregate quantities, and individual purchase histories from a large supermarket chain in the U.S. and an empirical model to represent grocery shopping by consumers and the supermarket pricing strategies. We estimate demand for 24 product categories and recover supermarket marginal costs consistent with the observed uniform price setting. With the estimated distribution of preferences in hand, we simulate the information acquisition by the supermarket from purchase histories, assuming that the supermarket uses Bayes’s rule to update its priors about consumers’ preferences. We then evaluate how profitable it is to set personalized prices using the information contained in purchase histories and the consequences for consumer surplus. Our results show that price personalization leads to an increase in profits of around 4% in all categories. We find that the effect on consumers is mostly redistributive, with a small number of consumers experiencing large losses and a large number of consumers experiencing small gains.
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Everyday Regular Prices in a Multi-Product Retailer
(with Nicoletta Berardi and Federico Ravenna)
February 2025
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Using a novel dataset from a large grocery retailer in a European country that never engages in temporary sale promotions, we establish that prices behave very similarly to regular prices set by retailers engaging in temporary promotional sales. We find evidence of state-dependent price setting in a multi-product firm when estimating the responsiveness of prices to exogenous demand shifts. The 'everyday regular prices' dataset is characterized by a more than trivial share of small price changes, and low synchronization of price changes across items. Price rigidity, selection and the extent of state-dependence are heterogeneous across items. Pricing of top sales items is more flexible and state-dependent compared to items that represent a small share of total revenues, a result consistent with price setting in a multi-product firm characterized by rational inattention. This result implies that inferences about firm-level price setting mechanisms from price microdata may be inaccurate if heterogeneity in price setting within the same firm is not taken into account.
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Publications
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(Mis)allocation of Renewable Energy Sources
(with Stefan Lamp)
January 2023
Journal of the Association of Environmental and Resource Economists, 10(1)
View Abstract
Policies to incentivize the adoption of renewable energy sources usually offer little flexibility to adapt to heterogeneous benefits across locations. We evaluate the geographical misallocation of solar photovoltaic installations and their relation with the uniform nature of subsidies. We estimate the dispersion of marginal benefits from solar production in Germany and compute the social and private benefits from optimal reallocations of residential solar installations keeping total capacity fixed. Our findings suggest that the value of solar would increase by 5.2% relative to the current allocation using conservative values for the rates of solar installations. Reallocating all solar capacity and taking into account transmission would yield gains that range from about 16 to 30%. A benefit-cost analysis shows that additional transmission can be beneficial if there is sufficient solar capacity reallocated across regions. This puts in perspective the social costs of nation-wide policies that do not offer heterogeneous incentives.
[Download paper]Media coverage: Sustain Change Grow Podcast
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Incentivized Mergers and Cost Efficiency: Evidence from the Electricity Distribution Industry
(with Rob Clark)
January 2023
Journal of Industrial Economics
View Abstract
In an effort to lower costs of provision, authorities have encouraged the consolidation of providers for a number of services such as electricity distributors, school boards, hospitals, and municipalities. In this paper we propose an endogenous merger process to evaluate the impact of government-provided incentives on consolidation patterns, and to evaluate the resulting outcomes. The process takes as input estimates from a stochastic frontier cost model, which yields an average cost curve for the industry. Policy parameters are used to simulate final configurations using offers that are the output of a Nash bargaining problem. The efficiency of candidate merged entities is determined by a relative-influence function that measures the degree to which the combination of the involved firms' levels of efficiency results in cost-increasing amalgamations, and an interconnection cost that measures the impact of the size of the conglomerate that is formed. We calibrate parameters by applying the merger process to replicate the observed industry reconfiguration and then use these parameters to simulate the consolidation patterns that would have resulted from different policy incentives. We apply the method to the case of Ontario, where past mergers of local electricity distribution companies were incentivized by transfer tax reductions and a further round of mergers was recently proposed. Our findings suggest that the proposed tax incentive would have no impact on efficiency levels and consolidation patterns, and that even a substantial subsidy would still leave about five times as many LDCs as desired by policy makers.
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Large-scale Battery Storage, Short-term Market Outcomes, and Arbitrage
(with Stefan Lamp)
March 2022
Energy Economics, (107)
View Abstract
The expansion of the share of renewable energy in the portfolio mix of the electricity generation sector has accelerated the development and integration of large-scale battery storage facilities. We document charging and discharging patterns in the California market and show how the utility-scale batteries' activity correlates with load and real-time prices during 2018 and 2019. The empirical findings are partially consistent with the optimal solution of an arbitrage maximizer, indicating that battery owners respond to price incentives only at certain hours of the day. In addition, we provide evidence that battery deployment in the years 2013 through 2017 lowered average intra-day wholesale price spreads and that current market conditions limit the profitability of batteries in this market.
[Download paper]Media coverage: Ergs and Equilibrium Podcast
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Free and Second-best Entry in Oligopolies with Network Effects
(with Adriana Gama)
August 2021
Journal of Public Economic Theory, 23(4), pp. 746-759
View Abstract
We compare the number of firms in equilibrium in a Cournot industry with positive network effects and complete compatibility, under free and second-best entry. Under free entry, the firms decide whether to enter the market or not; in the second-best problem, the number of firms is established by the regulator in order to maximize social welfare (the regulator controls entry but not production). We show that when individual equilibrium output decreases with entry (business-stealing competition), free entry may lead to more or less firms than the second-best problem. This contrasts with the standard (non-network) Cournot oligopoly model, wherein with business-stealing competition, free entry leads to an excessive number of firms compared to the second-best solution.
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Market Power and Renewables: The Effects of Ownership Transfers
(with Olivier Bahn and Paul Sarkis)
September 2020
Energy Journal, 42(4)
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The introduction of renewable energy sources (RES) in an electricity market changes the shape of the system's supply curve. In a perfectly competitive market, this causes a downward pressure on equilibrium prices called the merit order effect (MoE). However, when introducing or transferring RES assets to firms with market power, effects on inframarginal rents are ambiguous and depend on the share of RES capacity in the firms' portfolios. We quantify this effect empirically in the Ontario electricity market by finding equilibria under different counterfactual scenarios of RES ownership transfers and expansions. First, we identify the effect of market power in isolation by keeping the system's capacity fixed, but we transfer RES capacity from the fringe (competitive) to firms with market power. These transfers yield increases in prices of up to 24% relative to average wholesale prices. Then, in order to measure the interaction of market power with the MoE, we introduce new RES capacity to the system by giving it to different players with varying levels of market power. We find that, following a net expansion of RES capacity of 5% relative to total capacity, wholesale prices decrease by up to 30% in the case of perfect competition. However, if capacity is assigned to the largest firm the decrease in prices is only 7%. These findings suggest that the MoE can be largely mitigated by market power, hence the key importance of the nature of the owner of new capacity when designing uniform incentives for RES adoption.
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Long-Run Market Configurations in a Dynamic Quality-Ladder Model with Externalities
(with Marc Santugini)
August 2020
Journal of Economic Dynamics and Control, (117) 103943
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We study the impact of standard-setting by introducing an externality that increases product compatibility in the presence of asymmetric returns to investment in a dynamic quality-ladder-type model. We classify the long-run, multi-modal probability distributions over different market structures that arise from this model. In some cases, the lagging firm may remain in the market in the long-run depending on the strength of the externality. In the case where only the laggard invests in compatibility, it is possible that the laggard becomes a monopolist if the leader has a relatively low R&D capability and the two firms are almost symmetric in this same regard. This variety of multi-modal long-run distributions may have important consequences for the estimation and the simulation of this class of dynamic models.
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To Rebate or Not to Rebate: Fuel Economy Standards vs. Feebates
(with Isis Durrmeyer)
December 2018
Economic Journal, 128, pp. 3076-3116
View Abstract
We compare the welfare effects in equilibrium of two environmental regulations that aim at increasing the new cars fleet's average fuel efficiency: the fuel economy standards and the feebate policies. Maintaining the same environmental benefit and tax revenue, we simulate the implementation of each policy in France and the United States. Standard-type policies have larger negative welfare effects, up to 1.7 times those from the feebate. Effects on manufacturers are heterogeneous: some are better off under the standard regulation. The addition of a market to trade levels of fuel efficiency dominates the simple standard regulation and the feebate. We also consider the attribute-based standard, technological improvements, and the equivalence with fuel taxes as extensions.
[Download paper]Media coverage: LSE Business Review
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Entry and Pricing on Broadway
(with Taylor Jaworski and Maggie E. C. Jones)
June 2017
Applied Economics Letters, 25(10), pp. 653-658
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This paper investigates the pricing decisions of Broadway shows. We find evidence that incumbent Broadway shows lower prices several weeks prior to the opening of a new show. In addition, prices are lower when the threat of competition, due to more entrants, is larger. A decomposition suggests that prices are more important than quantities for changes in revenue prior to entry and that this pattern reverses after entry occurs.
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Dynamics in Research Joint Ventures and R&D Collaborations
(with Marc Santugini and Georges Zaccour)
April 2017
Journal of Economic Dynamics and Control, 77, pp. 70-92
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We investigate the short- and long-term effects of different types of R&D collaborations on firms, consumers, and the industry. To that end, we consider a differentiated-product market in which firms compete à la Bertrand and invest in process innovation in order to lower the production cost over time. Investments are stochastic and there can be cartelization or competition strategies among firms at the moment of making the decision on the amount to invest in R&D. Our results show that in equilibrium, the long-run welfare is larger under a research joint venture than under other environments. Discounted present value profits increase with the level of the spillover but there are asymmetries that depend on the firms' asymmetry on marginal costs.
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Intermittency and the Value of Renewable Energy
(with Gautam Gowrisankaran and Stanley Reynolds)
August 2016
Journal of Political Economy 124(4), pp. 1187-1234
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A key problem with solar energy is intermittency: solar generators only produce when the sun is shining. This adds to social costs and also requires electricity system operators to reoptimize key decisions with large-scale renewables. We develop a method to quantify the economic value of large-scale renewable energy. We estimate the model for southeastern Arizona. Not accounting for offset CO2, we find social costs of $138.4/MWh for 20% solar generation, of which unforecastable intermittency accounts for $6.1 and intermittency overall for $46. With solar installation costs of $1.52/W and CO2 social costs of $39/ton, 20% solar would be welfare neutral.
[Download paper]Media coverage: Marginal Revolution, Clean Technica
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Gasoline Prices and Fuel Economy of New Vehicles in Quebec
(with Philippe Barla, and Etienne Couture)
June 2016
Canadian Public Policy 42(2), pp. 181-193
View Abstract
We evaluate the short-run impact of gasoline prices on new vehicles registrations by fuel economy between 2002 and 2008 in the province of Quebec. We find that a gasoline price increase stimulates registration of new vehicles with a fuel consumption rate below 8.65L/100km (27.2mpg) while it lowers those of vehicles above that limit. While the impact is modest for most vehicles, large gasoline price fluctuations lead to changes in the fleet composition. This impact has an elasticity of -0.1. The federal feebate program increased sales of low-fuel consumption vehicles by 17% but overall fuel economy changed by less than 1%.
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Other Publications
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Politiques environnementales dans l'industrie de l'automobile et de l'électricité
Octobre 2019
Le Québec économique 8, Chapitre 12
View Abstract
Several policies have been implemented around the world to slow the growth of carbon dioxide (CO2) emissions. In Canada, the auto industry and the electricity industry are the second and third largest sources of CO2 emissions after the oil and gas sector. This chapter explores the design and implications of key policies to reduce CO2 emissions in these two sectors of the economy. A fuel tax is compared with the Corporate Average Fuel Economy (CAFE) standards and feebates for the purchase of cars. Subsequently, we compare the standards of renewable portfolios and feed-in tariffs in the electricity generation sector.
Media coverage: CISION
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Comments on the OECD Study and the Hausman and Ros' Paper about the Lack of Market Competition in the Telecommunications Sector in Mexico
July 2013
El Trimestre Económico 80(3), pp. 541-552
View Abstract
This article examines the two reports on the Telecommunications sector in Mexico. The first study is the OECD report, while the second was written by Hausman and Ros and criticizes the former one. Comments are only technical and are made with academic purposes. Both studies construct methodologies that are carried out using aggregated data and assess the problem assuming a perfect competition model, when the structure of the market in this sector calls more for a monopolistic competition analysis.
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