Curriculum Vitae: CV

Research

Publications

Heterogeneous Impacts of Cost Shocks, Strategic Bidding, and Pass-Through: Evidence from the New England Electricity Market [paper]  American Economic Journal: Microeconomics 14(2): 370-407,  2022    (publisher link to paper),  Online Appendix

Abstract: Industry-wide shocks can have heterogeneous impacts on firms' costs due to different firm characteristics. The heterogeneity in these impacts is crucial for understanding the pass-through of the shock, because of its implications on strategic competition. In the context of the gas price shock in the electricity market, I develop a method to identify heterogeneous impacts of the shock and show with a structural analysis that the heterogeneous feature of the shock induces markup adjustments of firms. Pass-through that is estimated without incorporating the existing heterogeneous impacts fails to reflect the change in competition arising from the shock, and is, on average, underestimated.

Working Papers and Projects

Cleaner but Volatile Energy? The Effect of Coal Plant Retirement on Market Competition in the Wholesale Electricity Market  [paper] Conditionally Accepted at  RAND Journal of Economics

Abstract: Clean energy transition is reshaping the power sector to rely more on energy that is subject to input cost volatility. I study the competitive effects of the transition from coal to gas, using gas as an energy source with volatile marginal costs of generation. Using counterfactual analysis, I show that the volatile nature of cleaner gas generation creates an environment that raises concerns about an increase in the electricity-generating firms' market power following the transition. However, such adverse effects are largely mitigated under a well-planned investment of new gas generation leading to a more competitive industry structure following the transition.

Renewable Portfolio Standards, Vertical Structure, and Investment [paper] (with Mario Samano), submitted

Abstract: 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 links 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 a misalignment between market structure and policy. 

Strategic Uncertainty, Competition, and Asymmetric Pass-Through [paper]

Abstract: Asymmetric cost pass-through refers to the widely documented phenomenon where prices rise faster when costs increase but decrease more slowly when costs drop. Despite its prevalance across various industries and markets, establishing the general cause of this asymmetry has been challenging. The most widely accepted explanation emphasizes the role of consumers, where search costs prevent them from acquiring price change information, or focuses on supplier-specific costs such as inventory and price adjustment costs. In this paper, I document asymmetric pass-through in a unique empirical setting where these potential causes of asymmetry are absent, suggesting that such asymmetry can arise solely from the strategic responses of suppliers. Leveraging this setting, I employ a test of asymmetric cost responses that is free from the challenges typically associated with estimating asymmetric pass-through. Using rich bidding data, I show that firms adopt different strategies when costs decrease, and I structurally estimate their ex ante beliefs about competitors' strategies that rationalize their best reponse bidding. The findings reveal that beliefs are systematically different and more dispersed in the cost-decreasing case, supporting the idea that a broader strategy set in this phase may increase uncertainty over rivals' behavior (strategy), resulting in prices not falling in line with cost decreases.

Capacity Investment Incentives in the Presence of Renewable Energy

Renewable Energy Investment and (In)equal Air Quality Improvement (with Zichen Deng)

(old working paper) Re-Examining the Conditions of Cost Efficiency for Hospital Consolidations: Why a Second Opinion May Be Necessary (draft available upon request)